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America vs. Europe in Industry 

A Comparison of Industrial Policies and 
Methods of Management 

By 

DWIGHT T. FARNHAM 

Consulting Engineer; Vice-President and Director, Society of 
Industrial Engineers; Member, American Sodety of Mechanical 
Engineers, Yale Engineering Society, Industrial Relations Asso- 
ciation of America, etc., etc. 







NEW YORK 
THE RONALD PRESS COMPANY 

1921 






Copyright, 1921, by 
The Ronald Press Company 



All Rights Reserved 



DEC 16 1921 



©&A630846 






To Captain John Case Phelps 
bois des loges 
October 18, 1918 



PREFACE 

In view of the astonishing strides which industry has 
made during and since the war, in England, France, Italy, 
and Germany, as well as in America, it has seemed desirable 
that the information presented in these pages should be 
disseminated as rapidly as possible, in the interest of standardi- 
zation of industry and elimination of industrial wastes. 

The subject is so extensive that although more than a 
year has been devoted entirely to gathering and arranging 
the material, I am keenly aware of the inadequacy of the pres- 
entation from certain standpoints. Unquestionably, also, the 
volume contains errors of fact, which through inadvertence 
have escaped detection. It was necessary, however, to choose 
between the course of presenting a mass of verified detail 
long after it had become ancient history and that of presenting 
the broad, general facts at once — while the wonder the Great 
War wrought in industrial methods and conditions was still 
upon us. 

It should be said that special effort has been made to avoid 
controversial matter, to keep away from enthusiastic exposition 
of theoretical panaceas, and to concentrate upon such matters 
as would interest the capable and practical business men in 
search of tried and successful methods of administration. In 
the light of nearly twenty years' experience as laborer, fore- 
man, superintendent, manager, and consulting engineer, the 
effort has been made to set down and interpret the experience 
of the most successful and far-sighted industrial executives 
here and abroad. The hope is that the record may aid those 
who now control the policies of our great industries, and those 
who are to control them in the future, to discharge their 



vi PREFACE 

increasingly great responsibilities with the highest possible 
degree of effectiveness. 

It is obviously impossible to make adequate acknowledg- 
ment to all who have lent their assistance in the investigations 
here summarized. Nevertheless so great was the courtesy and 
hospitality of certain of the industrial leaders abroad who 
gave me generously of their time that I wish to thank espe- 
cially : 

In England — Lord Leverhulme, Sir William Ashley, G. D. 
H. Cole, Dr. C. S. Myers, I. Haig Mitchell, Professor B. 
Muscio, Herbert Tracey, John Hilton, S. K. Ratcliffe, Page 
Arnot, Dr. A. F. Stanley-Kent, E. Hoult, General McNalty, 
Charles Renold, I. W. Chubb, J. P. Whiteford and J. G. 
Pearce, as well as various officials of Vickers, Ltd., Cadburys, 
Edgar Allen Steel Company, ,Morland and Impey, Lever 
Brothers, the Spirella Company, etc., etc. 

In France — M. M. Eugene Schneider, Henri Le Chatelier, 
Chas. de Freminville, Eugene Lemaire, Berliet, • Maurice 
Lacoin, J. de Morrini, J. M. Henneguy, as well as various 
officials of the Schneider, Citroen, Berliet, Renault, and other 
plants. 

In Italy — Dr. Luigi Luiggi, Ing. Renzo Norsa, Piero 
Pirelli, Ing. Diego Soria, Ferdinando Cusani Confalonieri, 
Ing. Enrico Coen Cagli, Erasmo Virgilio, Gian Carlo Stucky, 
G. C. Majoni, Giuseppe Fusinato, Dr. Giuseppe Velez, and 
Signor Vulpi, as well as various officials of the Ansaldo, Fiat, 
S. I. P. E., Breda, Pirelli, De Angeli, Ricordi, Edison, Italian 
American Electric, and other companies, together with the gov- 
ernment officials and chamber of commerce officials who 
received the commercial mission to Italy with such great 
hospitality. 

In Germany — Baron Wulf von Lohneysen, Fritz Neuhaus, 
Heinrich Herschberg, Ernst Huhn, various officials of the 
Deutsche Bank, at the Verein Deutscher Ingenieure, at the 



PREFACE vii 

Allgemeinen Elektricitats Gesellschaft, the Borsig locomotive 
plant, the Ludwig Loewe plant, etc., etc. 

I wish to acknowledge also the exceedingly intelligent 
assistance I received from the commercial attaches at the vari- 
ous United States embassies, whose knowledge of the condi- 
tions of the countries in which they are stationed is intimate 
and accurate. The more fully American business men avail 
themselves of the expert service available in this connection, 
the wider and more profitable will our foreign business prove. 
And finally, let me thank the newspapermen of Europe — men 
of the type of the Associated Press representatives and of the 
representatives of such papers as the London Times and Paris 
Herald — for their help, which proved invaluable. These men 
with their unbiased viewpoint, their high ideals and their abil- 
ity to present facts interestingly are the promoters of under- 
standing between the nations of the earth at a time when 
mutual regard, mutual trust, and mutual understanding are 
essential to the survival of industrial civilization. 



Dwight T. Farnham 



New York City, 
December i, 1921. 



CONTENTS 



Chapter Page 

I Fundamental Conditions 3 

The War and Industrial Efficiency 

Europe After the War — A First-Hand View 

Actual Conditions 

Industrial Disorganization 

National Difficulties 

Exaggerated Nationalism 

Slow Return to Thrift and Production 

Psychology of the Business Cycle 

Vitality of European Nations 

International Markets 

Handicaps to American World Trade 

Rejuvenated Industrial Europe 

America's Problem and Its Solution 

II European and American Business Methods ... 25 

Influence of Precedent in Europe 

Use of Words 

Business Negotiations 

Thinking Problems Through 

Talking Business During Lunch 

Working Hours in England 

Office Hours in France 

Food and Work in Germany 

The German Executive 

Military Discipline 

Paternalism in France 

Banking Procedure in France 

Visits t'o Industrial Plants 

The Italian Business Man 

Itinerary in Italy 

Need of Studying Foreign Business Methods 

III Organization 44 

Industrial Consolidation 

The "Vertical Trust" 

German Organized Economic System 

The Federal Council of Economics 

Present and Future Development 

Private Consolidation in England 

Federation of British Industries 

National Confederation of Employers' Organizations 

Labor Organizations 

Conciliatory Organizations 

ix 



x CONTENTS 

Chapter Page 

Wage Standardization 
Consolidation in France 
Consolidation in Italy 
Protection of Stockholders 
Authority for Signature 
Limited Earnings 
Corporate Organization Abroad 
Increased Desire for Facts 
Commercial Exhibitions 
A New Civilization 

IV European and American Labor yi 

Labor and Human Nature 

A Proletariat Class in Europe 

Lack of Opportunity Abroad 

Economic Evolution 

Result in Russia 

Conditions in Italy 

Political Situation in Italy 

Industrial Uprising 

Defeat of Bolshevism 

Steps in Development of Bolshevism 

Outbreak in Germany 

Demonstration in France 

General Situation in France 

Labor Situation in England 

Views of Representative Englishmen 

An Economist 

An Editor 

A University Professor 

A Government Official 

A Labor Leader 

A Leader of the Coal Strike 

An Industrial Leader 

Points Brought Out 

Some Conclusions 

Features of the European Labor Situation 

V Factory Buildings ioo 

Elements of Building Efficiency 

Effective Production 

Overhead Charges 

Europe Before the War — Efficiency vs. Durability 

English Factory Architecture — A Sheffield Plant 

Layout of the Foundry 

High Overhead and Efficiency 

Single-Story Buildings 

American vs. European Buildings 

French Factory Architecture 

The Power Station at Le Creusot 



CONTENTS xi' 

Chapter Page 

The Steam-Turbine Shop 

A Berliet Plant 

Italian Factory Architecture 

The Ansaldo Plant' 

New Fiat Motor-Car Plant 

German Factory Architecture 

The Ludwig Loewe Plant 

Proper Electrification 

The Power Plant, Foundry, and Machine-Shops 

The Brunnenstrasse Factory of the A. E. G. 

The Small Motor and Large Machine Factories 

Transportation 

"Efficiency of Use" 

American Factory Architecture 

Value of Efficient and Pleasing Construction 

VI Purchase and Storage 131 

An Example of Purchase Control 

Degree of Elaboration 

Physical-Perpetual Inventories 

Daily Material Disbursement's — Value 

Standard Maximum and Minimum Stock 

Systematic Preparation for Purchasing 

Examination and Follow-Up 

Horizontal Foot-Pounds 

Determination of Weight 

Rate of Turnover 

Applying the Principles 

Storage Units 

Numbering Storage Units 

Planning the Layout 

Graphic Repair Part System 

Piling Methods 

"Most Efficient Package" Principle 

Method of Transportation 

Rearrangement of Yard 

Control of Stores 

American Storage Methods 

Italian and French Methods 

German Storage Methods 

English Storage Methods 

VII Machines 161 

Machinery and Labor 

America's Supremacy in Machine Tools 

Approach t'o the Machine Problem 

Small Tools and Special Tools 

Machine Work in Modern French Factories 

Hand Work in France 

Machine and Hand Work in Italy 



xii CONTENTS 

Chapter Page 

German Machines 

Machinery in England 

Mechanical Handling and Transportation Machinery 

Scrap-Handling and Portable Car-Dumping Plants 

Use of Electricity 

Stimulants to Use of Machines Abroad 

Durability of European Machines 



VIII Standardization 181 

Management Engineering in Early Days 
Franklin as an Industrial Engineer 
Management Under Conditions of Today 
Meaning of "Standardization" 
i. Standardized Materials 

2. Standardized Labor 

3. Standardized Accessories 

4. Standardized Procedure 

Use of Terms to Denote Mass Production 
Standard Unit Assembly 
Progressive Machining 
Progressive Assembly 
Summary 

Standardization of Materials Abroad 
Private Research Departments in England 
Standardization of Accessories in Europe 
Standardized Accessories in Germany 
Standardized Accessories in France 
Progressive Machining and Assembly Abroad 
Advantages of Standardization 

IX Planning and Dispatching 209 

Casual Management 

Neglect of Factory Management 

Ignorance of Actual Conditions 

Increased Dividends Through Waste Elimination 

Tests of Scientific Management 

Some Actual Results 

Purpose of Planning and Dispatching 

Flow in Continuous Production Plants 

Remedy for Uneven Flow 

Requisites for Power-Regulated Speed 

Flow in Job Production Plants 

The Production Clerk 

Elements of All Systems 

1. Standardization 

2. Planning 

3. Dispatching and Graphic Control 
Summary of Methods 

The Planning System and Dividends 



CONTENTS xiii 

Chapter Page 

X European Methods of Planning and Dispatching . 234 

Scientific Management in France 
Some Notable Examples 
Progressive Machining 
A Well-Developed Planning System 
Progressive Manufacture in France 
Manufacturing Programs 
Mass Production in Germany- 
Progressive Manufacture in Germany 
Forms Used 

Planning and Dispatching in Germany 
Interest in Scientific Management 
Italian Methods 

Planning and Dispatching in England 
Dispatch Boards in a Chain Plant 
Centralization vs. Control by Foremen 
Dispatch Boards in the Plant 
Factory Order and Job Cards 
Other Installations of Scientific Management 

XI Rate-Setting and Incentives 264 

Fair Work for Fair Pay 

Economic Aspects 

A Proficiency Scale of Wages 

Lack of Individual Production Standards 

Personal Contacts in Former Times 

Bridging the Present Gulf 

Stockholders and Scientific Management 

The Day- Wage System 

Supervision Under Day- Wage System 

Evils of the System 

Piece Work — Rate-Setting by Bargaining 

Cutting the Rate 

Bonus Plans 

Rate-Setting by Scientific Analysis 

Opposition to Stop-Watch 

Justification of the Stop-Watch 

Individual Viewpoints 

A Statement by Samuel Gompers 

"Speeding Up the Worker" 

Responsibilities of Management 

Standardization vs. Choice of System 

Some Features of Piece-Work Systems 

Explaining and Installing Systems 

Gauging Plant Efficiency 

Fairness and Need of Rate-Setting 

XII Rate-Setting and Incentives Abroad 293 

Wage Payment in Italy 
Rate-Setting in Germany 
View of British Labor 



x i v CONTENTS 

Chapter Page 

British Employers' Opinions 

Machinery for Reviewing Rates 

Adaptability of the Emerson System 

The Priestman System 

An Application of the Group Bonus System 

Other Methods in Use 

Some Failures of Group Bonus 

Rate-Setting in France 

Method of Setting Standard Time 

Record of Bonuses Earned 

Other Systems in France 

National Characteristics 

XIII Personnel Direction 316 

Materials, Processes, and Gain 

Awakening to Human Needs 

Employment Management 

Elements of Scientific Personnel Management 

Shop Politics 

"Pull" and "Czarism" 

Inefficiency and Wilful Misinterpretation 

Standard Practice Instructions 

Determination of Base Rate 

Use of Charts 

Fluctuations in Living Costs 

Qualities Required of Personnel Directors 

Personnel Direction in France 

Employment Methods 

Industrial Relations 

Italian and German Methods 

Personnel Direction in England 

Some Actual Practices 

Restoration of Personal Contact 

XIV Administrative and Executive Control .... 349 

Influence of Stockholders 

Gain as a Motive 

Public Approval 

Factors in Industrial Organization and Operation 

Lessons from Russia and Italy 

Elements of Control 

1. Objects of the Business — Ideals 
Profits 

Statements and Reports 

2. Standards of Attainment — Budget Systems 
Sales Quota 

Cost and Profit 

Control Charts 

3 and 4. The Science and Art of Managing Men 

5. Mechanics of Organization 



CONTENTS 



XV 



Chapter 



Page 



Functionalization 

Relation Between Staff and Line 

Corporate Authority 

The Executive Organization 

Explanation of the Typical Organization Chart 

Fitting the Chart to the Personnel 

6 and 7. Control Mechanism and Rewards 

The Planning Organization 

A Successful Method 

XV Administrative and Executive Control in Europe . 379 

Objects of Continental Businesses 

France 

Germany and Italy 

England 

An English Firm's Organization Chart 

Delivery Dates 

Sales Quotas and Departmental Charts 

Classification of Executives and Clerks 

Decentralization 

Sales Policies 

Graphic Control 

Increasing Importance of Organization and Administration 

XVI Selection and Education of Employees .... 395 

Neglect of the Human Factor 

Phases of Conservation and Development 

Selection of Materials and Men 

Job Analysis 

Workman Analysis — Trade Tests 

Psycho-Technical Tests 

Miscellaneous Test's 

Training and Education 

Selection and Education Abroad 

England — National Institute of Psychology and Physiology 

Germany — The Charlottenburg Psycho-Technical Tests 

Germany Factory Tests 

Schools for Apprentices 

Result of German Industrial Education 

The English Education Act of 1918 

The Cadbury Brothers' Plan 

Other Training Schools 

Debating Societies 

Education of Managers 

French Apprenticeship Schools 

Industrial Education in Italy 

Future of National Industry 

XVII Shop Government and Profit-Sharing 428 

Democratic Control of Industry 
Intelligence vs. Numbers 






XVI 



CONTENTS 



Chapter 



Page 



Profit-Sharing — Appeals and Operation 

Spread of Education and Radicalism 

The Rights Implied by Profit-Sharing 

History of Profit-Sharing Schemes 

Opinions of Employers 

Fundamental Difficulties 

Efforts to Overcome the Difficulties 

Stock Ownership 

Shop Government 

Workmen on Boards of Directors 

Lines of Development 

Requisites to Participation in Management 

Participation in Management in Italy and France 

The Whitley Industrial Councils in England 

The Workshop Committees — An Employer's Analysis 

The Cadbury Plan 

Some Conclusions 

Works Councils in Germany 

The Law of 1920 — Powers Granted 

Duties of the Councils 

Growth of Trade Unionism 

XVIII Conclusion 458 

The Industrial Administrator and the Future 
Warfare and Human Development 
Industrial Effects of the War 
Education vs. Powers of Destruction 

Appendix A — Definitions of British Labor Terms . . . 464 

B — The Training of Workers — A Brief Reference 

List 470 

C — Prospectus of an English Day Continuation 

School 473 

D — Shop Government and Profit-Sharing — Eng- 
lish and German Works 477 

E — An Experience with Profit-Sharing . . . 481 



FORMS AND ILLUSTRATIONS 



Figure Page 

i. Renault Automobile Plant in Paris 6 

2. An Italian "Vertical Trust"' 45 

3. A French Vertical Trust 47 

4. Path of an Order in Cost Collecting as Scheduled by a German 

Concern 49 

5. Path of an Order Through the Plant as Scheduled by a German 

Concern 55 

6. Automobile Testing Tracks on Top of the Fiat Plant in Turin.. 116 

7. Modern German Factory Architecture 118 

8. Exterior of the Large Machine Factory of the A. E. G. in Berlin 122 

9. High-Tension Material Factory of the A. E. G. Plant in Berlin 122 

10. Erecting Floor of the Large Machine Factory of the A. E. G. in 

Berlin 124 

11. Switch Engine Driven by Storage Battery and Electrically Op- 

erated Turntable in Yard of A. E. G. Plant in Berlin 125 

12. Methods of Transportation in the Yard of the A. E. G. Plant in 

Berlin 126 

13. Tabor Company Shelf Storage Unit 142 

14. Diagram of a Division of a Scientifically Laid Out Storage Field 143 

15. Relative Efficiency of thj Two Most Common Methods of Storing 

Cylindrical Objects ' 147 

16. Yard Storage and Transportation at the A. E. G 153 

17. Central Stockroom in the Brunnenstrasse Plant of the A. E. G. . . 154 

18. Departmental Stockroom in the Brunnenstrasse Plant of the 

A. E. G 156 

19. Toolmaking Department at the Fiat 167 

20. Aerial Transport in Italy 171, 172 

21. Scrap Handling at the A. E. G 173, 174 

22. Portable Car-Dumping Plant 175, 176, 177 

23. Progressive Manufacture in America 194, 195 

24. Progressive Manufacture at the A. E. G 198 

25. Standardized Fire Station 203 

26. Progressive Assembly in a French Motor Plant 206 

2.7. A Planning Department 211 

28. Standardized Conditions 215 

29. Graphic Analysis of Departmental Capacities 218 

30. One Type of Reservoir 226 

31. One Type of Dissecting Mechanism 227 

32. Work Ticket or Card Service Card 228 

33. One Type of Planning Mechanism 229 

34. Dispatch Board Containing Work Tickets 230 

35. French "Flow Chart" Showing Method of Planning Turbines 236 

36. A Graphic Planning Chart 238 

37. French Instruction Card (Feuille D'Instruction 239 

38. French Work Ticket (Bon) 241 

xvii 



xviii FORMS AND ILLUSTRATIONS 

Figure • Page 

39. Folder for Instruction Card and Work Ticket (Fiche de Fab- 

rication) 242 

40. Stock Control Graph 245 

41. Forecalculation Sheet and Hollerith Machine Card 248 

42. Inside of Folder Used to Collect Cost Data in a German 

Factory 250, 251 

43. German Notification Cards and Order of Work Chart 254 

44. Departmental Dispatch Board in an English Plant 258 

45. Job Card Inserted in Machine Slots on Departmental Dispatch 

Boards 261 

46. Unstandardized Piece Work 273 

47. Type of Men Working under a Bonus System Based on Quality 

of Product, Man-Hours Expended, and Coal Saved 277 

48. Standardized Bonus Work 280 

49. Another Example of Unstandardized Piece Work 286 

50. A "Technical Man" 289 

51. A Typical Result of Placing a Crew on Bonus 291 

52. Instruction Card Showing How Time Allowed Is Computed .... 310 

53. Record of Percentages of Bonus Earned 311 

54. Analysis Sheet Showing Planned Time as Against Actual Time . . 312 

55. Chart Showing Actual Result of Personnel Direction in a Large 

Plant During the War 333 

56. French Application Blank 338 

57. German Employee's Record 340 

58. Forms Used in Personnel Direction in Germany 342 

59. An Application Card Used in England 345 

60. Forms Used in an English Employment Department 347 

61. Chart Showing the Result of Scientific Executive Control in 

One Plant 36o 

62. Cumulative Expense Chart 362 

63. Profit Chart 363 

64. Typical Organization Chart 369 

65. Combination of Technical Control with Statistical Control .... 373 

66. Mechanism of Planning 374 

67. Control Charts 375 

68. Main Organization Chart of a Progressive English Firm 382 

69. Divisional Organization Chart — Works Director 384 

70. Sectional Organization Chart — Design of Tools 387 

71. Charts Showing Percentage of Delivery Dates Kept 388 

72. British Departmental Chart 39° 

73. Weekly Production Chart 393 

74. Excerpt from a Typical Job Analysis Chart 400, 401 

75. Diagram of the Apprenticeship Courses at the A. E. G. in Berlin 413 

76. Work Done by Apprentices of the A. E. G. in Berlin 416 

77. Special Shop for Apprentices of the A. E. G. in Berlin 418 

78. French Educational Posters Showing the Effect of Strikes Upon 

the Workman 4^5 



America vs. Europe in Industry 



CHAPTER I 

FUNDAMENTAL CONDITIONS 

The War and Industrial Efficiency 

During the war the efficiency of American industry 
increased materially. This was due essentially to patriotism — 
which substituted the open mind for hidebound conservation, 
and which made results more important than the retention of 
traditional methods. Furthermore there was a general pool- 
ing of experience which raised the average level of proficiency 
considerably. Manufacturers visited each other's plants. They ^ 

discussed methods of administration, types of buildings, and 
mechanical equipment with a frankness that had previously 
been considered impossible. Men of unusual ability who had 
up to that time devoted their energies to their own business 
became available as advisers to industry in general. Men who 
had previously felt self-sufficient demanded expert help. The 
government organized control boards, advisory boards, educa- 
tional boards — whose orders were law. Raw materials were 
dealt with as to quantity, quality, and distribution. Labor 
was not only allocated — but analyzed, diluted, and trained. 
Business men sitting on such boards gained an insight into 
underlying principles of industry which could have been gained 
in no other way. 

Methods that were good enough when private gain was 
the consideration were scrapped and replaced by the best 
that the organized intelligence of the country could devise. 
New plants were erected embodying all that had been learned 
at home and abroad. 

The best minds of Europe came to America and placed 
their experience at the disposal of our manufacturers, finan- 

3 



4 AMERICA VS. EUROPE IN INDUSTRY 

ciers, and directors of transportation. And behind it all was 
the urge of necessity — the need to win in the race for produc- 
tion, and for the conservation of man-power, if the nation 
was to survive. 

America had eighteen months of intensive education in 
industrial efficiency. Europe had nearly five years. She was 
3,000 miles closer to hell, and above the whir of the machin- 
ery there was always the roar of guns. Conservatism and 
traditional inefficiencies break down very rapidly under such 
circumstances. 

Europe After the War — A First-Hand View- 
Realizing the situation and feeling the value of still further 
consolidation of this knowledge gained during the war, the 
writer sailed for Cherbourg early in the summer of 1920 with 
the intention of studying, on the ground, the industrial situa- 
tion in France, Italy, Germany, and England from the stand- 
point particularly of the increase in administrative knowledge 
and in principles and methods of executive control, in the most 
ably operated industries. To this end and because of the fact 
that a good deal of ground had to be covered in six months, 
the advice of government officials, civil and military, bankers, 
educators, and manufacturers who had been overseas since 
the armistice, was supplemented by similar information secured 
from the same type of men upon arrival in each country visited. 
The most efficiently managed plants were always sought, rather 
than the largest and most famous, on the ground that it is the 
ability of the leaders which ultimately locates the average level 
of a country's industries, the purpose of the study being to 
secure information which would increase the effectiveness 
with which industry is operated rather than to compare the 
average levels of operating efficiency in different countries. 
The writer was fortunate in his contacts, spending some 
time in Italy as a member of an American commercial mission 



FUNDAMENTAL CONDITIONS 5 

which, as the guest of the Italian government, visited not only 
the country's principal industries but came in contact with its 
industrial leaders under unusually favorable circumstances. 
He was admitted to various German plants at the request of 
the Foreign Office and the Deutsche Bank. In France he 
was a guest at Monsieur Schneider's chateau at the Le Creusot 
plant, to which visitors are admitted only with the permission 
of the War Department, and in England he was not only 
accorded unusual opportunities to study industrial establish- 
ments but was fortunate enough to be in close touch with vari- 
ous labor leaders at the beginning, of the coal strike. 

Typical of the plants visited in Italy may be mentioned 
those of the Fiat Motor Company in Turin, the Ansaldo ship- 
building and steel plants in Genoa, and the Breda locomo- 
tive plant in Milan. In Germany such concerns as the Allge- 
meinen Elektricitats Gesellschaft, the Ludwig Loewe Machine 
Tool Company, and the Borsig Locomotive Factory were 
studied. In France the steel and locomotive plants of the 
Schneider Company, and the Berliet, Renault (see Figure 1), 
and Citroen motor plants are typical of those investigated. 
Among those visited in England may be mentioned several of 
the Vickers plants, the Renold plant, Cadbury's, and Port 
Sunlight. 

Actual Conditions 

In visiting industrial plants arrangements were made to 
secure contact with the directors so that problems of adminis- 
tration could be discussed as well as those of manufacture. 
In addition government specialists, educators, publicists, labor 
leaders, welfare workers, consulting engineers, workmen, fore- 
men, and managers were consulted as well as the usual sources 
of information open to the tourist of a curious turn of mind. 

Particular attention was given to problems of administra- 
tion and organization to the executive control of production — 



AMERICA VS. EUROPE IN INDUSTRY 




FUNDAMENTAL CONDITIONS y 

both of labor and material — and to industrial relations. Build- 
ings were studied from the standpoint of their adaptability to 
the work to be carried on in them, rather than from that of 
their construction. Special attention was given to mechanical 
handling systems but machine types were regarded chiefly as an 
indication of manufacturing efficiency and the principle 
involved was noted, rather than any attempt being made to 
bring away detailed information as to dimensions or anything 
which might be regarded as a structural trade secret. Educa- 
tion was studied principally from the standpoint of its effect 
upon the future of industry as were such semieconomic sub- 
jects as shop government plans, the co-operative movement, 
profit-sharing, and housing. After all we have become an 
industrial world, and whatever influences the future of indus- 
try, shapes the citizen, and determines the importance and the 
survival of the nation — perhaps even the survival of our mod- 
ern civilization. 

Under the circumstances there should be no iniquity in 
assuming the attitude of the cold-blooded business man and 
of the research engineer in quest of what will benefit American 
industry directly, especially since business has become inter- 
national and the fallacy of splendid isolation for any country 
clearly recognized. Most of our information about Europe 
has been furnished — for one purpose or another — by the 
uplifter, the impractical socialist, the calamity-howler, and 
the clever writer in search of something which will jar the 
jaded palate of a public almost insensible from the thrills 
of the last six years. I shall therefore make no apology for 
the omission of "sob stuff" or for a frank endeavor to present 
without frills such facts as will increase the efficiency of 
industry if applied by men of industrial experience and with 
a first-hand knowledge of human nature. 

The assumption that European industry had made progress 
during the war was found to be eminently justified. In every 



8 AMERICA VS. EUROPE IN INDUSTRY 

country visited huge ferro concrete buildings of the latest 
type have sprung up since 19 14. These are mostly filled with 
American types of machine tools — paid for during the war. 
Wide-spread consolidations of capital have taken place so 
that in England, France, Italy, and Germany there are individ- 
ual organizations including over 100,000 men. In Germany 
the government is so organizing all industries that the 
benefits of mass purchasing, research, and standardization 
may be enjoyed by even the smallest concerns. Italy and 
France are turning their Alpine waterfalls into power to an 
extent that presages the replacement with this "white coal" 
of black coal imported at ruinous prices. Belgium is building 
her power plants at the mines, finding it cheaper to ship current 
over wires than coal, ashes, water, and sometimes ice in freight 
cars. Even England is planning hydro-electric monsters. 

Scientific management, in whole or in part, has been intro- 
duced into factories in Germany, Italy, France, and England. 
Time studies — the determination of a fair day's work by exact 
methods — have been in use in France since the seventeenth 
century. The larger Italian concerns have their industrial 
engineers whose work is to install the latest and most effective 
methods of manufacture. The most complete installations of 
scientific management I have ever seen are in England. At 
Le Creusot methods of rate-setting, which we "invented" in 
America only a few years ago, have been in use for over thirty 
years. Employment management, which we discovered and 
heralded to the world during the war, has been a part of 
French and Italian industrial organization since about the 
time of the American Revolution. We have no such safety and 
hygiene museums as exist in Germany. Our workmen and 
foremen are untrained as compared with those of Germany and 
France. The art of fitting the man to the job is still in its 
infancy in America. 

We are still plunging about in a sea of experiment as 



FUNDAMENTAL CONDITIONS 9 

regards workmen's representation plans, welfare work, and 
industrial housing as compared with England. Co-operative 
stores are still a doubtful experiment with us. Neither are 
European methods of industrial management the hoary col- 
lection of soothsayers' aphorisms they are popularly supposed 
to be by Americans who before the war took the sort of 
Cook's tour through a European factory which Henry Ford 
offers farmers visiting Detroit. 

Regardless of the level of industrial efficiency at which 
Europe started in that grim race, which began in August, 1914, 
for production of quantity and quality with the least expendi- 
ture of man-power, with the least expenditure of material, 
and with the least expenditure of coal and supplies, she has 
now a record of industrial achievement of which she may well 
be proud. The time has passed when the American manufac- 
turer can vent the spleen gathered in the art galleries and the 
cathedrals, through which his wife has dragged him, upon 
the antiquated factory buildings of Western Europe. Indus- 
trially Europe has arrived, and if the present trend con- 
tinues, our European competitors may, before many years, visit 
America to envy us our Metropolitan Museum of Art and 
to sneer at our industrial establishments. 

Industrial Disorganization 

Before turning to the discussion of specific factors in indus- 
try, brief consideration of certain fundamental conditions will 
render what is to follow more clear. In the first place the 
five years during which the population of Europe had been 
withdrawn from production and actively engaged in distruc- 
tion, had left the world short of everything. The economic 
balance, which had been slowly built up since the beginning of 
the Steam Age in the eighteenth century, was roughly 
destroyed by the economic isolation of Russia, by the Balkan- 
ization of Central Europe, and by the impoverishment of 



IO AMERICA VS. EUROPE IN INDUSTRY 

Germany. Before the war Russia provided the grain and the 
raw materials which England and Germany needed and fur- 
nished a market for low-grade materials — cotton, wool, etc. — 
and for manufactured goods which could not be absorbed else- 
where. The formation of a number of new countries in Cen- 
tral Europe meant government by the inexperienced and the 
satisfaction of long-supposed racial hatreds, until such time 
as self-control and knowledge of life could be acquired. 

As yet the new countries have the faults of the young: 
vanity, lack of knowledge of cause and effect, a proneness to 
get themselves into trouble or to be led into trouble by those 
with an axe to grind — faults which only time can cure. 
Meantime those who must come in contact with them also 
suffer. The postponement of the fixture of the German indem- 
nity kept Germany in the mental state of a business man who 
does not know whether the tax collector will take merely all 
he can find, or whether he will in addition send him to the peni- 
tentiary and garnishee his wife's wages. Under such cir- 
cumstances he is more inclined to move slowly and to conceal 
his assets than to branch out into new business and to display 
initiative. 'Meantime there is naturally considerable distrust 
of Germany's general integrity. She is thus a long way from 
functioning normally either as manufacturer or as consumer. 
In fact the whole economic world as regards raw materials, 
manufactured goods, and commerce — with Russia out of it 
and with Central Europe thoroughly disturbed — may be lik- 
ened to a man who has suffered temporary paralysis of a 
major organ and who has several other organs in bad condi- 
tion. No part of that man is going to feel right until every 
organ is functioning normally. It doesn't matter how much 
he hates his stomach, his job is to get it into condition again. 
The evolution of the economic world to the state in which it 
existed prior to 19 14, was too gradual and the resultant eco- 
nomic organism too closely knit, to permit general and unlim- 



FUNDAMENTAL CONDITIONS n 

ited surgery — no matter how necessary — without unpleasant 
results. 

National Difficulties 

In addition to difficulties due to Europe's failure to func- 
tion smoothly as an entity, the various integral parts also suffer 
from their own peculiar ailments. Italy has about 3,000,000 
more men than the country can support. These men — known 
in Italy as "the swallows" — formerly built railroads in Russia, 
harvested grain in Hungary and South America, and emigrated 
to the United States. Russia is shut. Money earned in Cen- 
tral Europe isn't worth bringing home and steamship rates to 
America at the present rate of exchange are impossible. As 
a result these men are engaged in building roads, harbors, 
canals, and various other public works at the expense of the 
Italian government in order to prevent starvation and disorder. 
Her factories are many of them idle for lack of raw material 
and coal. As things stand she must continue to support her 
excess population, ship about 300,000 men abroad a year, or 
secure raw materials sufficient to keep the great industries, 
built up during the war, in full operation. 

During the war France lost 57 per cent of her men 
between the ages of 19 and 32 who were mobilized — and 89 
per cent of her men were mobilized. She is short of labor, 
but she won't take Italians because of certain ancient diffi- 
culties with them. She is dependent upon the payment of the 
German indemnity to meet her budget so she is incurring 
great expense to maintain an army to enforce this payment 
if necessary. France is in much better balance than the other 
European countries, producing more of her foodstuffs and 
manufacturing a large proportion of what she needs. She 
is thrifty, her courage is magnificent, and the speed with 
which the devastated districts have been reconstructed is 
marvelous. 



12 AMERICA VS. EUROPE IN INDUSTRY 

Germany is handicapped by a bad reputation, by a cur- 
rency so depreciated that it is difficult to buy raw materials, 
and by the bewilderment of freedom after years of existence 
in which every act was directed to the last detail by indispu- 
table authority. 

England is handicapped by lack of markets in Russia and 
in Central Europe and by labor troubles. Two-thirds of 
Great Britain's foodstuffs must be imported. She can pay 
for these only by the sale of manufactured goods — which 
means competition with other countries. Labor has decreased 
production to such an extent that in many cases rising costs 
made production impossible. Until the issue is fought out 
and a better understanding is obtained between capital and 
labor, a return to normal conditions in England is unlikely. 

Exaggerated Nationalism 

Since the war an exaggerated nationalism has de velop ed 
throughout the world. All the racial jealousies which were 
repressed in the face of the common danger during the war 
have come to the surface now that the crisis is past. The 
race for commercial advantage under altered economic and 
political conditions has replaced the co-operation of allies 
engaged in a common task. Italy feels that France was allotted 
more than her share of the indemnity and that England 
is exerting an unfavorable influence in the Danube country 
and in the Balkans. France has lost heavily. The income 
of almost every French family has been to some extent affected 
as the result either of the devastation of war or of Russia's 
repudiation of her obligations. France can see relief only 
through Germany's being made to pay to the utmost. She 
feels that England as a manufacturing nation is following 
her own interest and doing everything possible to open the 
German and Russian markets. Germany is anxious to re-es- 
tablish herself with England and America for commercial 



FUNDAMENTAL CONDITIONS 13 

reasons. She hates France with the tribal hatred of the dog 
for the cat and as the visible strong arm enforcing to the ulti- 
mate letter the treaty of Versailles. England is following 
her usual plan of saying little, watching closely, and energeti- 
cally pursuing the policy of "business as usual." America is 
regarded by all with the mixed feelings of envy, hope, and 
expectation with which an impoverished family regards a 
rich relative. 

A part of this is, I believe, reaction from the unnaturally 
close association during the war. With the development of 
international finance, international commerce, world trans- 
portation and industry requiring world markets — under the 
influence of steam and electricity, which, in point of time, 
has brought France closer to America than New York was 
to Philadelphia in Benjamin Franklin's time — sincere co-oper- 
ation is essential. Ancient grudges are too expensive to main- 
tain and the faster the world learns this the quicker will be 
the recovery from the recent convulsion. 

Slow Return to Thrift and Production 

Convalescence has been marked by much the same symp- 
toms in every country. Five years' lack of production and 
destruction can be repaired only by thrift and increased pro- 
duction. The return to thrift has been marked by the buyers' 
strike — the refusal of the public to buy at prices which scarcity 
made it possible to demand, and the consequent reduction of 
the public's standard of living. This began in America early 
in 1920 with the "overall movement." 

The return to production, the reawakening of the willing- 
ness to work, and the battle with the tendency loosely termed 
"Bolshevism" began first in America with the suppression of 
radicals in 1919. France followed when the cavalry dispersed 
the red flag processions and smashed the one big union idea in 
May, 1920. The Italian Reds seized the factories in August, 



14 



AMERICA VS. EUROPE IN INDUSTRY 



1920, but after discovering that they could secure no raw 
materials, that no one would buy their finished product, and 
that there was a certain thing called "management," they 
climbed down as gracefully as possible upon the government's 
agreeing to endeavor to work out some plan by which labor 
could participate in management. Germany had one fight 
with radicalism in the spring of 1920 and another late in the 
autumn when an attempt on the part of certain radical 
employees to seize the factories in Berlin resulted in the 
workmen's being thrown out on their heads by the police. 
England's battle is not yet finished but is proceeding through 
the usual series of compromises. Meantime the obvious decay 
and putrefaction of Russia under radicalism, with strong 
backs and weak heads in the saddle was giving pause to those 
who had forgotten the limitations of human nature in their 
enthusiasm for the immediate Utopia. 

As the armies were demobilized the soldiers throughout 
the world rightly felt that they were entitled to a period of 
rest and recreation. Army life, which under conditions of 
modern warfare consists of long periods of inactivity followed 
by periods of intense excitement, with initiative and the fear 
of going hungry reduced to the minimum, is not conducive 
to an immediate return to the conditions of industrial life. 
There was a period, therefore, during which various substi- 
tutes for work were tried out and found wanting. 

Various nations attempted to enrich themselves by the 
free use of the printing press and it remained for them to learn 
by bitter experience that the value of paper money is in inverse 
ratio to the quantity issued. This was a period of panacea- 
hunting. The world was still weak from the ravages of that 
plague which for five years threatened the life of western 
civilization. It desired above all — even as does the typhoid 
convalescent — to drink a deep draft of something which would 
make it well and strong all at once. But it was observable 



FUNDAMENTAL CONDITIONS 15 

that the nations that first quit panacea-hunting and went 
back to work recovered their normal strength the fastest. It 
seems so simple that the only way to have things is to produce 
them, that it doesn't seem credible that it took the world two 
years to realize that fact and to return to work. 

Psychology of the Business Cycle 

Extortionists — men who had cornered the supply of cer- 
tain materials and manufactured goods, profiteers who 
demanded more for their goods or for their labor than they 
were worth, just because goods and labor were scarce — had 
to learn the lesson that the execution of the producer of auri- 
ferous goose eggs is bad policy. 

Theodore Roosevelt once defined work as "onerous exer- 
tion between periods of inspired enthusiasm." Most of us 
are short on inspired enthusiasm. We don't like to work. 
Furthermore when fate plays into our hands — creates two 
jobs for one man, pays us big wages for short hours, and 
makes the boss properly appreciative of our sterling value — 
we don't work. We become independent and we buy silk 
shirts — and really you can't blame us. Human nature is 
responsible. When we get to the point where we don't do 
any work and demand limousines, the price of limousines gets 
so high — since the makers of pleasure cars aren't doing any 
work either — that we revolt. We quit buying limousines 
and silk shirts and shoes — and then the factories are shut down 
and we are out of a job. 

After a period of involuntary repentance we become 
wildly anxious to work. We don't want limousines — we want 
bread. We become thrifty and production is considered prac- 
tically in the factory rather than academically in the lecture 
hall. Gradually industry starts up. We are willing to do a 
fair day's work for a fair day's pay. Production costs are 
reasonable. The speculators who withheld goods from circu- 



ifi AMERICA VS. EUROPE IN INDUSTRY 

lation on a rising market have also been smoked out and we 
can buy shoes cheaper at the bankrupt sales. Some of us 
even put aside a little money for the next rainy day. We 
have learned our lesson of thrift and hard work again at 
first hand in the bitter school of adversity and will probably 
remember the lesson until just about the day the crop cf easy 
times produced by this same thrift and hard work goes to 
our heads again and we again insist on limousines, no work, 
and big pay. 

A lot of people have for years been preaching thrift and 
hard work. But somehow we don't learn our lessons through 
our ears. An empty stomach speaks so much more convinc- 
ingly to most of us that we have to wait for a warning from 
that quarter of our anatomy before we take notice. It is 
unfortunate, but it is human nature, and human nature is 
very much the same the world over. 

Vitality of European Nations 

But in the study of symptoms and underlying causes we 
must not forget that Europe has been populated for over 
a thousand years with a sturdy and vital people — that bound- 
aries have shifted and kings have fallen, but that life and 
the nations have endured. This wasn't the first war in the 
history of Europe. Her people have survived even worse 
devastation in the past and have not only overpopulated 
Europe but have populated America, Australia, and Africa 
as well. Even after casualties of over 10,000,000, you can get 
a house easier in New York than you can in London, Paris, 
or Berlin. 

Neither must we forget that the reports which reach each 
nation about the others represent the unusual, the abnormal. 
Humanity wants news — something sensational — the fact that 
a grocery store in Milan has been sacked — not the fact that 
all is as quiet in 10,000 other European cities as it is at 



FUNDAMENTAL CONDITIONS 17 

Salem, Massachusetts. Furthermore a lot of things look 
worse on paper than they really are. Take the financial state- 
ments of certain Western European countries. They are not 
cheerful reading. But we must remember that even bank- 
rupts have continued to eat three square meals a day and to 
keep on having children. Some of them have even settled 
with their creditors eventually for a hundred cents on the 
dollar. Western Europe is no more bankrupt than the United 
States would be next Monday if the whole 100,000,000 of us 
collected all that our debtors, including the banks, owed us. 
The basic fact is that Western Europe has gone back to work 
and is producing. 

International Markets 

It has been estimated that the prosperity of this country 
depends upon the profitable exportation of the 2 per cent 
produced beyond our actual needs. Regardless of whether 
this figure represents the exact average or not, there is no 
doubt that there is a surplus of various articles. When the 
surplus cannot be sold, a seller's market becomes a buyer's 
market. Thereupon somebody who holds this 2 per cent and 
needs money cuts the price. Then the public concludes — "the 
profiteers are on the run, let's stop buying, prices are on the 
toboggan." We all stop buying, the factories shut down, and 
then, lo and behold, dividends on industrial stocks are passed, 
customers don't pay their bills, and labor walks the streets 
hungry. We have hard times and the bottom falls out of the 
stock market — since the price of stocks depends upon the 
physical assets behind them — the factory, the railroad, and the 
ships. 

The earning power of industry, which controls the incomes 
of most of us, depends upon its ability to dispose of its product 
— whether pickles or passenger service — at a slightly greater 
price than the cost of production. The greater the quantity 



18 AMERICA VS. EUROPE IN INDUSTRY 

of production the lower the cost to produce each unit, and 
the lower this cost the wider the field you can reach with 
your goods and the better you can meet competition. It is a 
case of to him who hath — production — to him it shall be 
given — to produce. The converse is also true; the cost of 
one pickle per year, produced in a $100,000 factory would 
be such a luxury as to interest even Lucullus. 

Handicaps to American World Trade 

1. Disregard for Ultimate Costs. Perhaps one of the 
greatest economic lessons America has to learn from Europe 
is that first cost is not last cost — that the cost per year to 
the consumer — be it boots or buildings — is what determines 
the value of a product and the real output of each productive 
unit. European buildings are built of brick, stone, and stucco. 
First cost is high, but think what the inhabitants save on insur- 
ance, fire departments, and repairs in 500 years. The British 
advertise stout boots, stout clothes, and stout hats. Imagine 
an American woman buying a stout hat ! Letters are printed 
from earls showing that a rain-coat has been returned to be 
rain-proofed again after five years' hard wear in the English 
climate. In America, an $i8-a-month clerk buys a new coat 
every year. The sides of railroad cuts in France are completely 
faced with stone. We keep a gang of high-priced men repair- 
ing ours as the earth washes down after every rain. The 
railroad from Cologne to Berlin is laid with metal ties. 
Bridges along the highroads of Europe are of permanent 
construction. We have just begun the construction of con- 
crete bridges. You can buy bicycles in England with a per- 
manent guaranty. European automobiles are better the second 
year than they are the first and are in excellent condition when 
twelve and fifteen years old. The American mission of which 
I was a member traveled all over Italy in such cars. They ran 
perfectly under conditions as severe as in any part of America. 



FUNDAMENTAL CONDITIONS 19 

The ultimate cost to the consumer — and that is what sells 
goods in the end — is less on an automobile that will last fifteen 
years than on one that will last two years. When in addition 
we consider that the former is manufactured by careful labor 
on cheap ground in an ancient building whose value has been 
written off the books for twenty years; and the latter, in a 
high-rent district of a big city in a fancy million dollar factory 
building by high-price labor on expensive machines which the 
manufacturer's vanity forces him to scrap every two or three 
years, Europe's industrial advantage may readily be seen. 
Our policy of "scrap it and buy a new one" results in our 
being, as a nation, the most stylish people on earth. We apply 
the rule to clothes, to houses and to factories, but it is the 
most expensive thing in our national life. It doesn't lower 
the cost of living and it is a handicap in the competition for 
world trade because other nations don't want short-lived 
manufactured goods. 

2. Standardization. Another handicap to American 
world trade is standardization. We all wear the same kind 
of clothes, while abroad every country, every province, every 
town — almost every individual — uses everything from his 
clothes to his traveling bag as a means of self-expression. I 
have seen men with pantaloon straps — such as Uncle Sam 
wears in the cartoons — in the French provinces. I have seen 
farmers at market in England in costumes which would head 
a procession of hooting small boys if displayed in Elmira, 
New York. I have seen old ladies on the Continent with 
assortments of luggage that could have been perpetrated only 
by the eccentric individual herself in collusion with the village 
harness-maker. A man breakfasting in lavendar pajamas in 
an- Italian restaurant provokes no comment and, queer as 
my American clothes must have looked to the peasants of 
the remote districts of Touraine, they never looked at me — 
much less stared or pointed. Mass production — standardiza- 



20 AMERICA VS. EUROPE IN INDUSTRY 

tion — such as we can put over in America where the millionaire, 
as portrayed by the movies, is the fashion-plate for our clerks 
and the female of the species sets the pace for the shopgirl — 
makes for low first cost. When, on the other hand, the pur- 
pose is to please a foreign market, people unused to reduction 
to a common denominator in a melting pot that makes one 
man, and especially one woman, as good as another as regards 
clothes and personal accessories, standardization presents a 
problem. 

3. Ignorance of International Trade Customs. One of 
our worst handicaps in the race for world trade is our weak- 
ness for what the British call "window dressing." We are 
so used to putting our most beautiful apples on top of the 
basket and to manufacturing our sample shoes in special lots, 
that it pains us dreadfully to be accused of the Yankee tricks 
of our ancestors who sold wooden nutmegs and basswood 
hams. More than once while traveling in the North Coun- 
try — that black manufacturing district which is the real Eng- 
land — I heard the expression — "Isn't that just like a damned 
Yankee!" Before I left New York I had been told by the 
vice-president of one of our greatest banks that the American 
manufacturer was considered a crook all over Europe because 
the goods he delivered weren't up to sample, while the samples 
submitted by Italy, France, Germany, and England represented 
the average, or below the average. I ran across the trail of 
this sort of thing all over Europe. The American manufac- 
turer averages as honest as any in the world, but he must 
learn world trade customs if he wishes to be valued as he 
deserves. 

4. High Cost of American Labor. America — under the 
lesson of the late war — invested heavily in a mercantile marine 
and built shipyards widely.. A foreign trade corporation was 
organized early in 1921 to help countries with depreciated cur- 
rencies buy our goods by means of a plan providing for the 



FUNDAMENTAL CONDITIONS 21 

application of the principles of barter without its inconve- 
niences. What, then, is to hinder the pursuit of this plan? 

Just this — at current rates of exchange a skilled mechanic 
costs $45 a week in America, $14.70 a week in England, $8.31 
a week in France, $5.47 a week in Italy, and $4.68 a week in 
Germany. 1 In the United States our skilled workman is 
operating from four to six automatics, in England from one 
to three, in France from two to three, in Italy from one to 
two, and in Germany from three to four. Even if we assume 
that workmen abroad produce only half as much as our own, 
there is still the handicap of our wages which are from three 
to nine times higher than those abroad. 

Our usual defense against the dumping of cheaply manu- 
factured foreign goods has been the erection of a tariff wall. 
At present such a course would result principally in making it 
impossible for Europe to meet her debts to America, since 
the only way she can pay up is to ship us manufactured goods 
or from the profits on goods sold to others. This last means 
at present securing a large part of her raw materials from 
us. If she secures it elsewhere we lose the profit on raw and 
semiprocessed materials as well as employment for cotton- 
raisers, miners, etc. We in the United States are perhaps the 
best equipped of all the great powers to sustain ourselves 
without traffic with others. Not even we, however, can do so 
without making it impossible for our debtors to pay us and 
without disrupting banking, transportation, and the thousand 
and one industries employing millions which are dependent 
upon the maintenance of international relations. Splendid 
isolation is an iridescent dream. It is futile to preach the avoid- 
ance of entangling alliances now. We are already entangled. 
The eggs were, scrambled when the steam engine changed us 
from agricultural to industrial nations — and we can't 

jThe actual prices paid are 85 shillings a week in England, 132 francs in France 
150 lire in Italy, and 360 marks a week in Germany. Return to normal exchange will 
correct a large part of this discrepancy. 



22 AMERICA VS. EUROPE IN INDUSTRY 

unscramble them. Russia has had a taste of splendid isola- 
tion. She has had to go back to the farm and even though 
she is 85 per cent agricultural the effect has been most pain- 
ful. Imagine what would happen if the inhabitants of New 
York, Manchester, Paris, Milan, and Pittsburgh had to raise 
their food and fuel in their back yards or perish. The life 
of a hermit is possible if you live on a farm and produce pigs 
and vegetables, but should the workers in the mines and in 
the steelmills decide to become exclusive and subsist by con- 
suming their own product the least they could expect would 
be a severe attack of indigestion! We tried to keep out of 
war. We tried to prevent influenza from reaching us. The 
world is an industrial entity. The life of the whole is depend- 
ent upon the health of each part and upon the co-operation 
of those parts, each with the others. 

Rejuvenated Industrial Europe 

England's expedient to keep her manufacturers and her 
workmen up to the mark has been to give wide-spread pub- 
licity to the activities of her competitors. Her papers scare- 
head what is going on in industrial America and in industrial 
Germany and print the accounts of murders and holdups on the 
inside pages. Just before I left London, all the papers were 
commenting editorially upon England's loss of a large sale 
to Germany. South America had called for bids on a gas 
plant. The lowest British bid was £162,000 with three years' 
delivery. Germany got the business with a bid for £90,000 
and three months' delivery. A little later American steel 
makers underbid the British on a Welsh job. The English 
papers were full of it. Furthermore, every technical maga- 
zine is filled with accounts of German and American methods. 

The older generation of manufacturers it is true are as 
ready to explode at the mention of "American enterprise" as 
you would be if your wife had tried to reform you at sixty 



FUNDAMENTAL CONDITIONS 23 

by quoting morning, noon, and night, the virtues of your 
next-door neighbor. But the young ones are learning. They 
know all about scientific management, mass production, and 
American machine tools. Germany, France, and Italy are 
equally interested. In traveling about it was often difficult 
to secure information because manufacturers, business men, 
and university professors kept me talking on American meth- 
ods and the methods of other European countries. They 
weren't spending their time telling each other how good 
they were. They weren't fooling themselves with any dream 
of splendid isolation. They were out for the information and 
they were thinking in terms of international affairs. 

America's Problem and Its Solution 

Our problem over here is to keep our industries in oper- 
ation, to keep our labor continuously employed, to make it 
possible for all of us to pay our bills and to main- 
tain reasonable earnings from the invested capital of Amer- 
ica. We have a mercantile marine and we require an inter- 
national market for our surplus products. We have a reju- 
venated industrial Europe to face. We are fat and prosperous 
and lethargic. Our competitors are poverty-stricken, lean, 
and ambitious. European labor has gone back to work, at 
prices which our present rate of exchange makes it seem hope- 
less to compete with. It is no use talking about avoiding 
entangling alliances. Industry and commerce are interna- 
tional and since we are an industrial and commercial nation 
the ruin of Europe means the ruin of America. 

The remedy lies in the encouragement of such measures as 
will drive exchange back to normal and restore the economic 
balance of Europe. It lies in an emergence on the part, not 
of the intellectuals but of the common people who elect our 
presidents, from the self-satisfaction of the provincial into the 
open-mindedness of the cosmopolitan. It lies in the popular 



24 



AMERICA VS. EUROPE IN INDUSTRY 



study of European conditions, methods, and peoples. It lies 
in intelligent travel upon the part of our business men and in 
the progress in the art of international thought and negotia- 
tion, which only knowledge of world facts gathered at first 
hand can give; and in the firm resolve on the part of every 
unit in the vast industrial organization, which is the real 
America — from the last-hired workman to the widow who 
owns a single share of stock — to assume personally the respon- 
sibility for the success of our enterprise. If we will do this 
there is no question but that our country will assume, and 
that she will hold, the leading place in international trade 
competition to which her native abilities and her natural 
resources entitle her. 



CHAPTER II 

EUROPEAN AND AMERICAN BUSINESS METHODS 

Influence of Precedent in Europe 

In America there is a tendency for each millionaire to 
improvise his own executive and business methods as he piles 
up his million. Thereafter this material proof of his success 
remains a monument to the correctness of the said methods 
and a personal tribute to their author. Of course, it is quite 
possible that he might have made two millions if he had 
adopted other methods — but such thoughts are disturbing — 
a man shouldn't be a hog anyway, he reasons — and a million 
ought to be weighty enough proof of success for any practical 
man. 

Abroad — in France, Italy, Germany, and England — busi- 
ness methods are more in accordance with precedents devel- 
oped under centuries of business negotiation. Trading with 
countries widely different in race, customs, and morals has 
made an exact method of procedure necessary. Words must 
be more carefully chosen and consideration must be given 
to the effect of each sentence upon the mind of the hearer 
when his historical and national environment is taken into 
consideration. In England the word "bloody" is so awful 
a term that all London gasped when an actor dared to utter 
it on the stage and the next daring author who attempted to 
interject it into a play was promptly suppressed by the censor. 
A college friend of mine informed a group of German school 
girls that "he guessed he was the goat," and it was only after 
they had been shooed to safety by a horrified chaperone that 
he realized that he had announced that he was a particularly 
loathsome and unmentionable sort of roue, The head of a 

25 



26 AMERICA VS. EUROPE IN INDUSTRY 

great university spent a quarter of an hour, as we walked 
up and down his garden after tea, telling me exactly what 
happened in the mind of a serious Englishman, athirst for 
knowledge, when he opened an American textbook and found 
such a ribald expression as "any foreman who would treat 
a man that way, ought to have a brick bounced off his bean." 

Use of Words 

An Englishman returning recently from America com- 
plained in the Times that the famous Americans — authors 
and the like — whom he had met, were uninteresting conversa- 
tionalists because they described all their experiences in slang 
stock phrases — either they all "worked like hell" or things 
"hurt like the devil" and everybody he met talked just the 
same way. The first time I came into contact with English 
business men to any extent, I was seriously embarrassed to 
find to what an extent just such stock phrases came to my 
lips. I was continually censoring myself and enduring all the 
embarrassment a cowboy might undergo who tried to talk 
like a Harvard instructor. The English business man — and 
the same is true in France, Italy, and Germany — says exactly 
what he means, selecting the word which will convey the 
exact shade of meaning desired with almost as great care 
as that which is displayed by a lawyer drawing up a 
contract. 

Furthermore, the European business man has a good 
deal better idea of the effect his words will have upon the 
hearer — and of what the recoil will be — than has the usual 
American business man. If we don't produce the desired 
effect the first time, we try again, until we get the range, or 
if we miss our quarry we know of another prospect just as 
good. The difference is between a hunter armed with a 
twelve-shot automatic in a forest where game is plentiful and 
.a man armed with a duelling pistol, for which he must exactly 



EUROPEAN AND AMERICAN METHODS 27 

weigh out powder and shot, alone with a single deer on a 
desert island. A number of years ago a man in control of a 
large corporation made a trip into Canada to renew some 
important agency contracts. Two days later he returned 
sweating blood and wiping his brow at the nearness with which 
disaster had overtaken him. "I thought I'd throw a scare 
into them at the start by telling them all the rotten things 
they'd done to us this last year and then make a grab for 
better terms before they came to. But I'm damned if they 
didn't think we wanted to quit doing business with them 
and it took me two days to bind up their wounds and get 'em 
where we had 'em before." 

Business Negotiations 

It is only recently we have ceased to be proud of shirt- 
sleeve diplomacy. Instinctively our virile American business 
man hates knee-breeches, red ribbons, and monocles. We 
still scorn the finer arts of business negotiations. We like 
to bull it through by sheer force of personality. That is so 
much easier than to think the whole thing out beforehand, 
taking into consideration the likes and dislikes, the historical 
background, and the racial psychology of the foreigners 
with whom we are to deal. "Rough and ready," that's our 
motto. 

I saw some of that rough-and-ready stuff at the organiza- 
tions of an international trade board in Paris. The majority 
of the American delegation didn't know French. When an 
Italian made a speech he made it in French and all the Belgians, 
Frenchmen, and Britishers understood it and had their plans 
laid about the time the interpreter had blundered half-way 
through what passed for a translation. As a result the Amer- 
ican delegation was left at the post whenever it seemed desir- 
able. When an American made a speech more than likely 
he indulged in what the British chairman referred to as 



28 AMERICA VS. EUROPE IN INDUSTRY 

"picturesque Americanisms," the sort of stuff that has "pep" 
— that we like to hear and applaud our public speakers for. 
As a result the interpreter was often aghast when we finished 
one of our speeches and the whole meeting had to go into 
executive session to decide just what we did mean and to get 
it translated into French. 

When it came to the interpretation of parliamentary law, 
we found out which nations invented parliaments and which 
nation was new to that form of government. The British 
could slam a motion onto the table and indulge in three asides 
and two caustic rejoinders before the American chairman 
could get his throat cleared. And many times, when we 
brought in a resolution — something which in all innocence 
we believed would do the effete nations of Europe worlds 
of good — we walked on seventeen varieties of pet corns we 
didn't know existed. It required endless tact on the part of 
our delegates who were internationally minded to calm our 
confreres to the point where they could keep their hands below 
the level of their shoulders and to convince them we weren't 
trying to wreck the peace of Europe. A celebrated English 
editor whom I met in the National Liberal Club in October 
likened the negotiations between the American and European 
delegations held during the formation of the League of 
Nations to a poker game in which a callow youth with high 
ideals went up against a bunch of experienced and hardened 
players who knew not only the game, but the cards and each 
other's tricks, histories, abilities, and personal peculiarities. 
"There could be only one result," he said, "and now the old 
players are howling to heaven because the parents of the 
rooked young man won't pay up." If we are to win even a 
place in the International World Trade Handicap, we must 
learn the game. A Frenchman isn't crazy because he wears 
a beard and gesticulates and it is a safe rule to follow that an 
Englishman is never as big a fool as he looks. 



EUROPEAN AND AMERICAN METHODS 29 

Thinking Problems Through 

A short time ago the head of one of our largest banks 
told me that thirty years' experience with American business 
men had convinced him that our greatest fault is our failure 
to think our problems clear through. "We think them through 
to a certain point," he said, "and then jump to a conclusion. 
Such procedure is responsible for a large percentage of our 
business disasters." 

Last fall it happened that I traveled from Manchester to 
London on a luncheon train. The journey took about three 
hours and during that time the men who occupied the table 
across the car from me were preparing for certain business 
negotiations which were to take place the next day. They 
first wrote down on a piece of paper the points they wished 
to make. , Then they discussed these points to the last detail 
and made notations of the more important. They then con- 
sidered what the other parties to the proposed deal would 
be likely to say and devised ways and means of meeting every 
possible move. They then discussed their strategy — the order 
of presentation most likely to produce the effect they desired. 
Next they reviewed the whole thing, and finally the man who 
was to be spokesman gave an oral rehearsal of what he was 
going to say, to be sure that he was letter-perfect and in order 
that the other men might criticize him. I have prepared for 
a good many business deals but I have never before encoun- 
tered such thorough preparation as those men went through. 
Under the circumstances, failure seemed almost out of the 
question. 

An interesting episode occurred during the above discus- 
sion which illustrates another characteristic of European 
business life. About an hour after the consultation occurred 
the train passed through the most beautiful section of the 
Peak district. Instead of casting an eye out of the window 
now and then and interpolating an occasional remark about 



3Q 



AMERICA VS. EUROPE IN INDUSTRY 



the scenery into the business conversation — which would have 
resulted neither in full enjoyment of the rocky glens nor of 
complete attention to the business in hand — one of the English- 
men said, "Suppose we look out of the window for a few 
minutes." They thereupon were silent for fifteen minutes. 
Then, after their rest period, they again gave their work their 
undivided consideration. As a general rule your European 
business man believes in giving his full strength to whatever 
he is engaged in, whether it be a business deal or a pleasure 
trip. 

Talking Business During Lunch 

Salesmen who have done business with Englishmen even 
in Canada for the first time often come back with, stories of 
how they created a bad impression upon their customers by 
attempting to talk business during luncheon or dinner. The 
custom of inviting a man out to lunch and then making him 
work his brain while he consumes your food is probably one 
of the most reprehensible habits American business usage has 
developed. It is not only an insulting form of bribery — since 
it implies that he is willing to sacrifice his backer's interest 
to a paltry donation of food — but it is inefficient. Either 
he enjoys and digests the food, giving scant heed meanwhile 
to your proposition, or else he uses his brain during the meal 
and later functions at loss of power during the attack of 
indigestion which inevitably follows. No time is saved by 
doing business during a meal and then running at half-speed 
all the afternoon. We are a nation of dyspeptics. The usual 
American of forty-five looks about as old as a northern Euro- 
pean at sixty and luncheon conferences play their part in our 
premature decay. Whenever you begin to think that you 
must work while you eat to become a Napoleon of finance, 
it is well to reflect that an attack of indigestion was responsible 
for the loss of Waterloo. 



EUROPEAN AND AMERICAN METHODS 31 

Working Hours in England 

We are somewhat prone to laugh at the Englishman's 
office hours — ten to one and two-thirty to four-thirty or five — 
and at his week-ends in the country. And how we scream 
with merriment at the idea of afternoon tea ever being intro- 
duced into our own virile, masculine American offices ! While 
our waist band is still intact, it is well, however, to restrain 
our cachinnation sufficiently to reflect on the ribaldry caused 
by the wearing of a wrist watch three years ago. We are 
learning fast but we haven't yet learned to specialize in the 
employment of our time. We are prone to demand admira- 
tion because we pretend to begin work at eight-thirty or nine 
and stay in our office until half-past five, with a business 
conference for lunch. If you don't believe an Englishman 
concentrates harder on his work while he works, or on his 
play when he plays, just try to talk sport to him during work- 
ing hours or to talk business to him while he is enjoying his 
afternoon tea. 

Furthermore he guards his time very much more carefully 
than the average American business man. The appointment 
system is used to the fullest possible extent. If you want 
to see a man of any consequence anywhere abroad you must 
either write him or phone his secretary. You are then told 
when to come and you are quite likely to learn at the beginning 
of your talk the hour of his next appointment. If you do 
not complete your business in time allotted, a second appoint- 
ment is arranged. There is no stimulant to the omission of 
irrelevant details and to keeping well to the matter in hand 
equal to the knowledge that in exactly twenty minutes the 
next man will arrive and your time will be up. As a result, 
an amount of business can be done in a short time which is 
little short of miraculous to the man who is used to taking 
his time about things because he has all day in which they may 
be done. 



3 2 



AMERICA VS. EUROPE IN INDUSTRY 



Neither are week-ends in the country all pheasant-shoot- 
ing, golf, and light conversation in the baronial hall. If you 
don't arrive with a secretary loaded down with dispatch-cases 
you will probably be lonely. At dinner you will see all the 
guests in the house, but if you haven't letters to write, reports 
to prepare, or conferences to hold in your room, you are 
likely to have the baronial hall to yourself most of the time. 
Week-ends abroad are an opportunity to do clear thinking, 
free from interruption — not a round of hectic entertainment 
which sends you back to town hating your hostess only a little 
less than the work before you. 

Office Hours in France 

In France the morning hours are used by business men 
in various ways. Some men arrive at their offices very early 
in the morning. You can generally count, however, on finding 
them in from about ten until a little before twelve. Luncheon 
is taken very seriously. The business man generally goes 
home to his family and follows the meal with, a siesta — as 
was long the custom of the Rockefeller associates — or with 
a walk in the garden. By two-thirty you will begin to find 
men in their offices again and you can count on doing business 
until seven o'clock. This is at first rather hard on the Amer- 
ican business man who has been compelled to substitute a 
continental breakfast for his regular ham and eggs and a 
stack of wheats and who hasn't yet accustomed himself to 
beginning lunch with a couple of pounds of hors d'oeuvres. 
Business talk of a highly concentrated sort, flavored with the 
sauce of strange surroundings and the chance of misunder- 
standing due to different mental processes, is a pretty poor 
substitute for food along about half-past six, and if you 
stagger out with any very clear idea of what was said from 
then until seven, the first few times you try it, you are more 
versatile than most Americans I have met. 



EUROPEAN AND AMERICAN METHODS 33 

Food and Work in Germany 

The present German system of mixing food and work 
resisted my most earnest attempts at solution. When we 
drove out to the Country Club on Sundays, my friend the 
Kommerzienrat carried a small paper suitcase filled with sand- 
wiches of various sorts. At intervals he or one of the children 
would remark, "Well, I think I could eat something." Where- 
upon the suitcase would be opened and all who so desired 
could put away a small portion of cheese or ham encased in 
brown bread. Sometimes these inspirations arrived at half- 
hour intervals and sometimes it would be a couple of hours 
before the divine afflatus would descend. But wherever we 
went — by motor, launch, rowboat, or on foot — the paper suit- 
case always accompanied us. When I went through a factory 
very often no one would think to eat from seven o'clock — 
when I had a very continental breakfast at the Adlon — until 
along about five in the afternoon, when we would be driven 
in desperation to some big restaurant on Unter den Linden 
and would there gorge ourselves until our eyes bulged from 
their sockets. The office force seemed to have a very appe- 
tizing meal in dining-rooms attached to the works somewhere 
around noon and we generally inspected the kitchens about 
the time our belts were drawn up to the last hole. The work- 
ing hours of directors and high-class business men seemed 
to follow those of the English very closely. 

The German Executive 

The personal efficiency of the German executive is exceed- 
ingly high and military discipline is the key-note of his staff. 
He is more likely to go in for art or music as a recreation, 
however, than for golf, so that he loses his shape perhaps 
even sooner than we do. Perhaps the highest example of 
personal efficiency to be encountered in Germany is that of 
the Direktor of a very large motor company. This company, 



34 



AMERICA VS. EUROPE IN INDUSTRY 



which is somewhat on the order of our General Electric 
Company, employs over 100,000 men. The Herr Direktor 
— whom you see only on appointment and after the pre- 
sentation of eminent credentials — occupies a room perhaps 
30 feet square, equipped with a large mahogany desk. He 
is most cordial and shows you the standard form upon which 
all reports come to this desk. When the report has been 
digested, he notes his orders thereon in the space provided 
and drops it through a slot in the top of the desk which leads 
to the room below, filled with the various secretaries trained 
to do his bidding. If there are certain points to be taken 
up with his lieutenants the report is placed in the proper basket 
located in the right-hand leg of his desk and at a certain 
scheduled hour in the afternoon a department head arrives 
and a conclusion is reached — after which the report pursues 
its course down the chute according to the usual routine 
manner. 

The perusal of those reports requires concentrated atten- 
tion on the part of the Herr Direktor in order that the most 
advantageous decision may be reached. This means that 
there must be no interruptions. To that end, when he desires 
isolation the Herr Direktor touches a single button and presto 
— all doors are automatically locked and — lest some incautious 
neophyte might rattle a door handle or turn in a phone call — 
a red light is displayed outside each door and on the operator's 
switchboard. In case, however, of dire disaster or a mo- 
mentous crisis in some department, it is possible to drop a 
ticket — colored in accordance with the department in peril — ■ 
into a glass box near the door. This informs the Direktor 
that his attention is desired, although not demanded, upon 
matters pertaining to that department and allows him to use 
his own judgment as to whether he shall remove his attention 
from the particular business in which he is immersed at the 
time. 



EUROPEAN AND AMERICAN METHODS 35 

Military Discipline 

When the head of a large German concern gives orders 
to his subordinates the assistant does not lean against the 
wall, or puff at a cigarette, or say "huh?" when the Direktor 
gets through. He doesn't even say, "Wouldn't it be well to 
consider, sir, doing it in this way instead." The subordinate 
— even if he be of very high rank himself — stands with his 
toes out and his heels together with an invisible ramrod down 
his back and his eyes fixed on his chief's face with an expres- 
sion of the most intense intelligent attention. When the 
chief's orders have been rapped out — one word after another 
like bullets from an automatic — he says, "Ja wohl, Mein 
Herr," makes a quarter turn left, and marches from the room. 
And after you have seen the German apprentice schools, with 
every youngster frozen solid to attention when you enter the 
room, you know that that assistant went out and split up the 
chief's orders, and communicated them to seven or eight of 
his subordinates — who themselves stood to attention and after 
in turn saying, "Ja wohl, Mein Herr," passed on the word 
to their subordinates until almost before the splash made by 
the orders of the big chief had subsided in the center of that 
great lake of an organization the little ripples were lapping 
up on the distant shores and things were being done without 
question as the murmurs of "Ja wohl, Mein Herr's" died out 
among the far boundaries of the industry. Military discipline 
is great stuff for getting things done, but you want to be careful 
what kind of a rock you heave if you're the boss. 

Paternalism in France 

In the same type of industry in France, paternalism would 
be the note. French business is founded upon this and upon 
making certainty sure. People new to this insistence upon 
conducting business in such a way that there can be no doubt 
about exactly what was done during each step of the trans- 



36 



AMERICA VS. EUROPE IN INDUSTRY 



action and to the demand of proof of character and stability 
before negotiation, rashly conclude that the French are so 
dishonest and so suspicious by nature that they won't do busi- 
ness with each other or with an outsider without documentary 
proof to the nth degree. One disgusted business man with 
whom I foregathered at a small table in front of the Cafe 
de la Paix even went so far as to insist that the vanished 
red trousers of the poilu had been converted into tape for 
the confusion of visiting Americans. Be that as it may, the 
French business man doesn't take any chances. 

If you rent an apartment it is carefully specified that you 
are to return that apartment when the lease expires in exactly 
the same state as you find it. If you drive a tack in the wall 
you must remove that tack and fill up the hole. If you paper 
the drawing-room with pink cupids you must remove said 
cupids and replace the dingy brown paper you found there — 
no matter how much more desirable pink cupids may seem 
to you, because — Monsieur reasons — the family of old maids 
or the cure who follows you as tenant may not care to have 
la vie d' amour continually and insistently called to their atten- 
tion. When you stop to think of it, this is logical reasoning 
on the part of the landlord and in the long run increases the 
return on his investment. If you don't like the fittings which 
have become customary in France, you can change them but 
you've got to put everything back as you found it when you 
leave. The French are nothing if not logical. 

Banking Procedure in France 

If you want to experience French safeguards in their 
pristine purity, open an account in a French bank. As soon 
as you have learned to pronounce its name clearly enough so 
the taxi-driver will take you there instead of to the railroad 
station, enter the marble portals and accost one of the elegant 
bemedaled functionaries who gesticulate in the shade of a 



EUROPEAN AND AMERICAN METHODS 37 

magnificent onyx column. During the polite silence which 
immediately follows, your nationality is diagnosed with the 
result that the most junior dignitary present is dispatched to 
cherchez Henri. Presently Henri arrives and addresses you 
in a cockney accent acquired while driving a truck in White- 
chapel and fitting himself thereby to act in his present inter- 
preter-financial capacity. You are then politely conducted to 
la salle, which looks like the waiting-room of the old Kansas 
City railroad station, except that it has counters along the 
sides. Henri shows you how to fill out a blank which requests 
information of a most surprising nature, and eventually you 
exchange it for a number printed upon a pink slip of paper. 
Then you find out why la salle looks like the waiting-room 
of the Kansas City station. 

For the subsequent half -hour Henri entertains you with 
his experiences during the war and philosophizes upon human 
nature and the characteristics of nations. He then informs 
you that the bearded gentleman who has been giving an imita- 
tion of an old-time train announcer is approaching your 
number. You move up to a window and after a lengthy 
converse with another bearded gentleman with a ribbon in the 
buttonhole of his frock coat, Henri informs you that you are 
quite correct, there is money belonging to you in the bank, 
that in about three days you may call and secure a check book 
with your name printed on each check, and that thereafter 
your signature will be honored as long as la bureau centrale 
is convinced that you have money on deposit. 

In about three days you return, Henri is again sought, and 
upon presentation of your signature you receive another pink 
slip, you occupy la salle for half an hour and when your 
number is called you receive an elegant embossed check book, 
about as big as a cedar shingle, with your name carefully 
translated into French printed on each check. You then 
request a ruling from la bureau centrale as to whether you 



38 AMERICA VS. EUROPE IN INDUSTRY 

shall write your name in French or with the spelling bestowed 
upon you by your parents. Eventually you are granted per- 
mission to retranslate your name into English each time you 
draw money and are at last ready to write your first check. 
The procedure thereafter is comparatively simple. You have 
become acquainted with Henri's lurking places, you know how 
to write the check, affix the stamp, and where to get a pink slip 
in exchange for it. You can eventually — if your stay be long 
— recognize which hundred the station master is beseeching 
to come forward and finally la bureau centrale has become 
used to your signature. It then takes you about half an hour 
each time to draw your thousand francs — but the system is 
absolutely tight. No one can get your money and you can't 
get any of the bank's money. La bureau centrale is backed 
with complete information and nothing is left to the memory 
of Charley, the paying teller, and consequently no one has 
to pay for the mistakes which cost money under our system 
and which eventually are charged to the bank's customers. 

Visits to Industrial Plants 

A visit to a factory in France is quite as much of a 
ceremony. I desired to see a certain great steel plant which 
employs something over 100,000 men and makes everything 
from electric motors and automobiles to big guns and battle- 
ships. On Wednesday, therefore, I looked up the address on 
the map and told the taxi to drive to La Madeleine, which I 
happened to know how to pronounce. After a few blocks an 
immense gray stone building with a mansard roof hove in 
sight. In a marble hallway at the end of a turkey red carpet 
stood a huge shell which glittered in the dusk. In a hallway 
to the left sat a grizzled concierge — resplendent in gold lace 
and medals. To him I presented my letter of introduction 
to the director. This resulted in elaborate directions, amid 
which I detected the mention of the third etage, which bitter 



EUROPEAN AND AMERICAN METHODS 39 

previous experience had taught me was the fourth floor. 
Dodging the acenseur, which further previous bitter experience 
had taught me did not usually understand my French and so 
was more inclined to stop between floors than at a point com- 
patible with a dignified exit, I climbed three flights of stairs, 
and after the requisite number of turns encountered another 
gold-laced functionary who led me to a room very much like 
one of our board rooms except that the walls were lined with 
books and the table equipped with photograph albums. I 
foresaw a long wait. 

In quite a short time, however, a venerable man entered, 
shook me by the hand and addressed me in French. From 
the simplicity of his clothes I might have taken him for an 
ancient retainer or one of our own multimillionaires, but one 
glance at the broad brow and features worthy of Leonardo da 
Vinci himself convinced me that I was in the presence of one 
of the leaders of French industry. After a few words of 
conversation in which he had very much the advantage of me, 
I was invited to attend a special cinematograph exhibition with 
him. For two hours we sat with a secretary and a half a 
dozen heads of departments and saw battleships launched, 
great guns in action on the Somme front, machine shops in 
operation, and various sorts of welfare work carried on at 
the plants. At the end of the show I was invited to attend 
a second exhibition the next afternoon. At the end of this 
performance I was turned over to the engineer who has charge 
of all the industrial engineering work in the establishments. 
Along about seven o'clock I was informed that if the War 
Department were favorably inclined I would receive a letter 
about Saturday. On Saturday morning there arrived by post 
a formal invitation to proceed to my destination by the fourteen 
o'clock Sunday train and to put myself in the hands of the 
chauffeur who would meet me at the station. 

About twenty-two o'clock the local on the little branch 



40 



AMERICA VS. EUROPE IN INDUSTRY 



line drew up at the station and I descended from the once 
elegant but now delapidated and blood-stained first-class car- 
riage and was saluted by a blue and uniformed individual 
standing in the shadow of a large red limousine. We whirled 
at once up steep stone-paved streets, past roaring blast furnaces 
to the gates which guard the wing of the chateau reserved 
for guests. Here were more red carpets, gold lace, and salutes. 
After traversing long corridors lined with English sporting 
prints and pictures of the Shah of Persia, the King of Spain, 
and the President of France, I was assigned to a sleeping 
apartment, a private dining-room, and was turned over to 
certain skilled servitors who would make the most polite head 
waiter at the best New York hotel look like a biscuit-shooter 
in a Barbary Coast beanery. I was also presented with a 
map and photographs of the town and of the factories, hos- 
pitals, etc. 

At eight o'clock Monday morning there was a clanging 
of gates, the whir of a motor and amid low bows on the part 
of the staff there arrived the Director in Charge of Receptions 
with his retainers. He is one of the most splendid gentlemen 
I have ever encountered — military carriage, carefully waxed 
blonde mustache, monocle, red ribbon in immaculate button- 
hole, ivory-headed cane dangling on a wrist strap, and a train 
of secretaries with portfolios behind him. After certain highly 
gratifying exchanges of compliments we went into executive 
session. An interpreter and a limousine were assigned to 
me and a schedule was worked out. At such an hour the 
superintendent of the locomotive shops would receive us; at 
such an hour we should be at the steel plant ; at one o'clock 
on Monday the chief engineer of the A group of plants would 
lunch with me and on Tuesday the chief engineer of the B 
group. On Tuesday afternoon we would inspect the hospitals 
and later the old folks' home and the schools. And as it was 
written, so it transpired. 



EUROPEAN AND AMERICAN METHODS 41 

We drove furiously from plant to plant. Gates in the 
stone walls flew open at our approach, bemedaled veterans 
saluted us as we entered, and superintendents rode on to the 
next plant with us so that we might complete our conversa- 
tions. The whole thing is typical of the French method of 
doing business — first be sure you are right, make every pos- 
sible preparation, and then carry out the whole thing as per 
schedule at terrific speed. "Verve" is the only word that 
expresses the French in action, and once you have experienced 
it, you cease to wonder why the Germans didn't get to Paris. 

The Italian Business Man 

Your high-class Italian business man is the most charming 
gentleman in Europe. As a rule of splendid physique, he 
dresses in the utmost good taste and speaks purer American 
than anyone in Europe. For the most part he is somewhat 
new to business as it is done in America, large mergers and 
immense industrial units being the developments of the last 
few years in Italy. He is anxious to learn, however, and his 
interest in American business systems and in American office 
devices is at times almost touching. While he, like the 
Frenchman, is a Latin, the Italian is to the business man of 
France what the charming southern gentleman of the old 
school is to the strenuous inhabitant of our industrial North. 
He is astute enough, but in matters of organization and of 
performance as per carefully thought-out schedule, his climate 
makes him so much of a gentleman that he sometimes scorns 
to connect — when connection means "undignified hurry" or 
"pushing commercialism." With his workmen the Italian's 
manner is somewhat that of an old-time duke with his sub- 
ordinates. Superficially the subordinate receives gratefully 
whatever is handed out to him but after dark he is inclined 
to relieve his feelings by scrawling "Viva la Sovieta" all over 
the walls of the village. 



42 AMERICA VS. EUROPE IN INDUSTRY 

Itinerary in Italy 

I went to Italy as a member of a commercial mission of 
twelve. We were guests of certain national Italian commer- 
cial organizations and of the Italian government. We trav- 
eled in high-powered motor cars and special trains and were 
shown so much of industrial Italy in two weeks that we 
averaged about four hours' sleep per night. The governor 
of the province with a delegation of distinguished business 
men received us in the royal red-carpeted waiting-room regard- 
less of the .hour at which we arrived in each provincial capital. 
We had a grand fiesta at Venice and we were banqueted at 
the Lido, at Porte Fino, and the Villa d'Este. Restrictions 
as to the consumption of cakes were loosed for our benefit 
and motors brought princesses and rare collations to remote 
industrial districts so that we might lunch amid historic set- 
tings with all the delights which reach their most perfect flower 
in an old and a high civilization. Considering the ambitious 
nature of the program, the short time for preparation and the 
difficulties to be encountered in a country only just rewon 
from the conqueror and even then in the throes of serious 
labor troubles, it was remarkable that the only contretemps 
Avere those due to a desire to show us too much territory or 
to accede to the most inconsequential whim expressed by any 
member of the party. Where an Anglo-Saxon will shove you 
into the first car at hand and call out, "come on, get started, 
folks !" the Italian will stand bowing and interpolating 
"gratzia" and "as the Signor desires" for thirty minutes and 
then run you through every village at fifty miles an hour and 
around every corner on two wheels to make up for lost time. 
The result is the same ; the Italian method is. more picturesque. 

As in the case of the French, but to a more marked degree, 
great adroitness and marvelous dexterity at high speed replace 
the careful planning and the plodding, calculated advance of 
the Teutonic business man. Vivacity and gay vociferousness 



EUROPEAN AND AMERICAN METHODS 43 

must not be mistaken for lack of common sense by the Anglo- 
Saxon worshipper of strong silent men. Neither does versa- 
tility mean vacuity. A certain Italian gentleman of our party 
could not only keep a banquet table in roars of laughter, dis- 
course learnedly upon the relative merits of Botticelli and 
Michael Angelo, race a train down the station platform with 
his arms full of bottles, drive an aeroplane, or tango with the 
ladies down the corridor of a special train at midnight, but 
he could diagnose the psychology of his market for building 
material and personally direct construction work so skilfully 
that he was able, though hardly thirty, not only to support his 
family but to own motor-cars, art treasures, and country villas. 

Need of Studying Foreign Business Methods 

America is now a world power and owns a mercantile 
marine. We must do business abroad increasingly as the 
years pass. To do this we must understand the foreign 
business man and his methods. The art of negotiation is 
not a game for amateurs. Provincialism must give way to 
finesse. We must learn French. We must learn to say 
exactly what we mean. We must replace good intentions and 
a weakness for aphoristic ideals with a knowledge of racial 
psychology and historic likes and dislikes. We can't afford 
to hate foreigners because they don't understand us. "Je suis 
Americairi' must cease to be a preliminary to ingenious 
gaucherie and must become the sign of the man who thinks 
and functions with the suavity and diplomacy of the citizen 
of the world. We must not be satisfied with making the 
United States the greatest country in the universe in our own 
eyes and in the eyes of visiting foreigners. We must learn 
to create that opinion wherever our ships and our industries 
lead us. This will require an understanding and knowledge 
of the races and habits of thought of the world, and the first 
step is the study of European business and industrial methods. 



CHAPTER III 

ORGANIZATION 

Industrial Consolidation 

In 1 9 14, Englishmen were very much exercised over the 
local appearance of trusts and monopolies. They foresaw 
in them the downfall of that bulwark of the nation — the 
independent shopkeeper. In 1920, Europe's industrial consoli- 
dations dwarfed those of America. The same thing has hap- 
pened in England, Italy, France, and Germany. Outside of 
the steel trust our largest industrial consolidation is perhaps 
the General Motors Corporation, operating 45 factories and 
employing 85,000 men. The Ford plant with 50,000 employees 
is probably our largest single plant. 

Italy. In Italy the Ansaldo Company, engaged in ship- 
building, machine work, general steel fabrication, and airplane 
manufacture, employs over 100,000 people and is capitalized 
at 500,000,000 lire. The Fiat Company — manufacturing 
automobiles, tractors, and camions, employs over 25,000 men 
and possesses the largest motor car factory in Europe, one 
building of which contains 1,500,000 square feet of floor space 
and supports a trial speedway 1,300 yards long. The S. I. P. 
E. chemical plant — probably the largest which survived the 
war — is a quarter of a mile wide and over a mile and a half 
long. The Ilva steel companies (see Figure 2) are capitalized 
at 300,000,000 lire and include iron, manganese, and lignite 
mines, blast furnaces, electric furnaces, factories for the manu- 
facture of refractories and cement, marine and other engi- 
neering works, hydro-electrical plants, and a steamship com- 
pany. The Italo-American Navigation Company is capital- 
ized at 40,000,000 lire, and the Port of Genoa at over 30,- 

44 



ORGANIZATION 



45 



©BRESCIA 



TREVISO 



JRIESTE 



MILANO® 



*F. Roja 



TORINO 

o Bolzanelo 
Co e J% r, 'P. 

^/saft-Savorii 




]io E. 





Modena 



Castiglioncello 



FIRENZE 
LIVORNO s. Giov. Vald. 

• Castelnuoro 
'oh,. ©Ribolla 

Oi, 



o Marina 



■■■hrnlo^e tf B SnellJ tB,I ?T 

^fFallor7ic B a aCC,nel10 
VGrosseto 

Monte Argentario' 

J°' ,a ®OMonterotondo 
ROMA®\« 




F.Pescara © 




BAGKOLI«S% Torre Ann 



® Metallurgical Companies^ 
(§) Metallurgical Companies with Blast-Furnaces. 
© Mining Companies supervised by or joined to "Ilva's" 
© Mechanical Companies and Establishments. 
9 Auxiliary Industries connected with Metallurgy in which 
"Ilva's" has an Interest. 

Electric and electro-metallurgic Industries in which "Ilva's** 
has an Interest. 




ts 



Figure 2. An Italian "Vertical Trust" 

Establishments of the "Ilva" Company, Ltd. 



4 6 AMERICA VS. EUROPE IN INDUSTRY 

000,000. The Franco Tosi turbine plants employ 7,000 
people and the company is capitalized at 80,000,000 lire. The 
Romeo Company, which manufactures engines, air com- 
pressors, etc., grew so rapidly during the war that it is now 
capitalized at 50,000,000 lire, as against less than 1,000,000 
before the war. The Rossi cotton factory and the De Angeli 
cotton-print plant each employ over 6,000 hands and the 
Cantoni factory 5,000. The Pirelli rubber factories employ 
over 13,000 men and women and the Breda locomotive plant 
employs 8,000. 

A consolidation of some ten power companies has taken 
place recently representing the larger part of the hydro-elec- 
tric power which Italy already has developed. One power 
company is capitalized at 50,000,000 lire and produces over 
207,000 kilowatts, another produces 48,000 kilowatts, another 
52,000 kilowatts, and another 30,000. One plant in the 
Dolomite Alps will be developed to 350,000 horse-power by 
1927, which will make it the largest in the world except for 
Niagara. Italy is working toward the development of 
5,000,000 horse-power — from the Alps — whose melting gla- 
ciers furnish an abundance of water all summer and from the 
Apennines whose rainy slopes furnish water during the winter. 
It is estimated that altogether 15,000,000 horse-power could 
be economically developed in Italy. 

France. In France the Schneider establishments (see 
Figure 3) in which everything from steel to battleships and 
automobiles are manufactured, employ over 100,000 men. 
The company occupies some 17,000 acres of ground, of which 
1,730 acres are actually under roof. These figures do not 
include the plants outside of France — such as the Skoda plant 
— in which the company is interested. The largest plant at 
Le Creusot — a city of 50,000 — employs between 20,000 and 
30,000 people. The Berliet plant, which is one of the most 
modern automobile plants in Europe, employs more than 



ORGANIZATION 



47 




Figure 3. A French "Vertical Trust" 

Establishments Schneider 



12,000 men. The Renault plant near Paris, manufacturing 
motors and tractors, grew from an establishment employing 
4,500 men in 1913 to one of 22,000 in 1918. At present 
about 20,000 people are employed. France has already de- 
veloped over 400,000 horse-power in hydro-electric plants 
and estimates that over 5,000,000 more can be developed in 
the Alps and more than another million in the Pyrenees 
region. 



48 AMERICA VS. EUROPE IN INDUSTRY 

England. In England, Vickers, Limited, has consolidated 
with itself such concerns as the British Westinghouse until it 
employs more than 100,000 men. Its larger single units will 
some of them run close to 20,000 men. Lever Brothers, the 
soap manufacturers, employ 20,000 people in two plants alone, 
to say nothing of those employed in securing and transporting 
raw materials in South Africa and the Pacific Islands. Cad- 
bury's chocolate plant at Bourneville employs nearly 10,000 
people. 

In England the Ministry of Transport is planning the 
construction of a vast hydro-electric power plant on the Severn 
and Wye rivers. By means of a series of dams and basins, 
tunnels, pumping plants, and turbines it proposes to make use 
of the tidal waters to generate 500,000 horse-power. 

Germany. In Germany the Rhine Elbe Union employs 
375,000 men and is capitalized at over 1,000,000,000 marks. It 
began with a consolidation of such concerns as the Gelsen- 
kirchen Company (46,000 men) and the Deutsch-Luxemburg 
(45,000 men), which own coal and iron mines, blast furnaces, 
steelmills, coke ovens, tar and ammonia works, docks, ships, 
and motor-car plants. Later it acquired such plants as the 
Bochum Caststeel Company, the Rhenish Westphalian and 
Saxon electric power plants, Boehler Brothers steel plants and 
the Loeb motor-car works. Late in 1920 the Siemens and 
Halske Company (capitalized at 205,000,000 marks), the 
Siemens Schuckert Company (87,500,000 marks), and the 
Siemens Company of Nuremberg (235,500,000 marks) were 
added together with certain other electrical interests of con- 
siderable magnitude. The Krupp plant is capitalized at 
175,000,000 marks and has been employing 55,000 men since 
the armistice. 

These vast consolidations are directly the outgrowth of the 
war, when each country in self-defense was forced to reor- 
ganize its industries under government supervision. In 



ORGANIZATION 



49 



Operating Bureau 



Copy of Order i Ch »"Q. es & ( 
(]\ ^additions 1 

' (2) 



Payroll Dept 
(5) 




Bill of outside 
people 



Checking for Order number 

to be closed 

(give serial nos.) 

(11) 
Checking Order Nos. 
to be billed 
(12) 



Checking overhead 
(14) 



Posting Differences 
(15) 



Listing Order 

Numbers Closed 

(13) 



Comparison 

with estimate 

(13) 



Notice of 
Costs 
(19) 



Notify Bookkeeping Dept. 
(16) 



Figures Refer to 
Numbers of Forms Used 



Figure 4. Path of an Order in Cost Collecting as Scheduled by a 

German Concern 



5o 



AMERICA VS. EUROPE IN INDUSTRY 



America decontrol occurred almost immediately after the 
armistice. In England they were getting rid of their war 
control boards during the summer of 1920. But in Germany 
— where the stress remained acute longer— the war ministries 
were made a step in the evolution of industrial organization 
which is taking place. Although this was not the case in 
Italy and France, nevertheless the advantages of consolidation 
were equally manifest to all countries abroad, as is evident 
from the cases we have cited. 

The "Vertical Trust" 

The German movement is the best defined and the organi- 
zation was systematic rather than a more or less haphazard 
development as in the case of the others. Furthermore, the 
German movement contains certain well-defined features — 
such as the vertical trust, the provision for mass buying for 
small industrial units, for organized research, and for the 
exchange of standards of production and the workmen's repre- 
sentation clauses, which make it unique. The vertical trust, 
as the name implies, is a consolidation vertically rather than 
horizontally as is usual in America, where companies manu- 
facturing a single class of finished product — say automobiles 
or matches — are brought under a single board of directors. 
In the case of the vertical trust, besides factories for the 
production of finished cars there would be foundries, blast 
furnaces, iron and coal mines — in fact an organization similar 
to the one Ford in America and Berliet in France were work- 
ing toward when they erected the blast furnaces in connection 
with their motor plants, or which the Endicott- Johnson Com- 
pany had in mind when they evolved their "hoof-to-hoof" 
slogan to describe their activities in the manufacture of shoes. 

This type of organization insures a steady market for the 
raw material and a steady supply of raw material for the 
subsequent plants, thereby increasing economy of operation 



ORGANIZATION ci 

and stabilizing employment. To a considerable extent this 
same type have developed in the Schneider and Berliet plants 
in France, in the Ilva plants in Italy, and in the Lever Brothers 
plants in England, but these examples represent the individual 
initiative of one man or of a small group of men rather than 
a national development as in the case of Germany. 

German Organized Economic System 

Two engineers — Dr. Wichard von Moellendorf, Under- 
secretary of State in the Federal Ministry of Industry, and 
Dr. Walther Rathenau, son of the organizer of the A. E. G., 
are responsible for the German system of organization which 
is known as the "Planwirtschaft," or "Organized Economic 
System." These men organized the German industries for 
war production and are men of practical experience as well 
as of unusual ability. Their plan was developed before the 
armistice and purposed to organize all German industrial and 
commercial concerns into one vast trust in much the same 
manner in which a single multibillionaire who had purchased 
the plants in their entirety might consolidate them for eco- 
nomical operation. The scheme called for organization by 
industries — iron and steel corporations, textile organizations, 
chemical companies, and the like into twenty single trusts, 
each of which contained every factory of its class in the 
country — and for the fusion of all these specialized trusts into 
a single non-specialized All-German Trust. 

The steps in putting this plan into operation were as 
follows : 

During the war Germany established government control 
of industry — with absolute control of production, prices, and 
trade — just as did the allied countries. This was disliked by 
capital, but after the war the socialists forced its continuation, 
hoping that it might be the means to the development of state 
socialism. 



52 



AMERICA VS. EUROPE IN INDUSTRY 



After the 19 19 revolution the radicals felt strong enough 
to discard such indirect means and a commission was ap- 
pointed to consider the means of transferring the industries 
to state ownership. This commission, although under the 
leadership of socialists, declared the time was not ripe for 
radical experiment and socialization was killed — largely by 
the moderate socialists themselves. 

The Organized Economic System was then brought for- 
ward as an alternative by Herr Wissell, Minister of Industry, 
who presented the plan to the Cabinet in May, 1920, as a 
substitute for socialism. Some such substitute appeared 
necessary in the face of the prevailing industrial anarchy and 
labor unrest and to repair by the avoidance of the pre-war 
system of wasteful competition the wastage of war. 

This Organized Economic System provided for the forma- 
tion of an All-German Trust composed of twenty subsidiary 
trusts organized by classes of industry which would — 

1. Distribute and regulate raw materials. 

2. Regulate production. 

3. Increase productive efficiency by means of organi- 

zation, standardization, and the elimination of 
wastes — in order to decrease the cost of produc- 
tion. 

4. Organize sales with a view to the elimination of 

competition and middlemen. 

5. Increase co-operation between employers and em- 

ployees by means of national wage agreements 
and shop councils. 

6. Promote scientific and technical research. 

7. Provide special training for workmen. 

The Federal Council of Economics 

In the summer of 1920 the Federal Council of Economics 
(Reichswirtschaftsrat), which is a parliament of business, 



ORGANIZATION 



53 



was officially sanctioned by the German government. Such 
a council had been proposed years ago by Bismarck to sit 
equally with the Reichstag and to have charge of all financial, 
industrial, commercial, and labor matters. The worth of such 
a council was not proved, however, until the war, when the 
Ministry of Economics and Production (Reichswirtschafts 
Ministerum) was formed to control raw materials and food, 
to promote efficient production, to further research, and to 
devise methods to enable the small industries to enjoy the 
benefits of standardization and mass purchase by combination. 
Out of the brain of Bismarck then, from the exigencies of 
the war, from the demands of the disciples of Karl Marx, and 
from the product of German engineering training, was born 
the greatest plan for the government of an industrial people, 
by an industrial people, and for an industrial people, which 
the world has ever known. 

Members of the Federal Council of Economics are elected, 
not as representatives of political parties but because each 
represents some business interest — capitalist or labor — or 
because he is a specialist in industrial, commercial, technical, 
or labor matters. The council is divided into groups varying 
in size in accordance with the national importance of the 
industry represented. The agricultural group has 68 mem- 
bers ; trade, banking, and insurance have 44 members ; garden- 
ing and fishing 6; communications and public undertakings 
34; manual labor 36; the consumers 30; officials and profes- 
sions 16. Twelve members are nominated by the Senate 
(Reichsrat) and twelve by the Cabinet from among citizens 
famous in business or applied science. It is considered a 
greater honor to be a member of the council than to be a 
member of the House of Representatives (Reichstag). Ex- 
Cabinet ministers and the mayor of Berlin are members, as 
are such captains of industry as Hugo Stinnes, Cuno, Walther 
Rathenau, von Siemens, and socialistic leaders like Karl 



54 AMERICA VS. EUROPE IN INDUSTRY 

Kautsky. Half the delegates are employers and half em- 
ployed, except for the nominated group. 

The council's powers are almost unlimited, since they 
advise the government and propose all laws having to do with 
industry. Furthermore, they act as a check on ministerial 
decrees. Ultimate control rests, as in America, with the 
Parliamentary houses, but inasmuch as all bills must first go 
to the council, the opportunity for first publicity, invaluable 
in a democracy, rests with them. So far the Reichstag has 
bowed to the council's recommendations. The Federal 
Council of Economics controls all the subsidiary trusts, since 
the chiefs of these trusts are elected as their representatives 
to the Council. Representatives of the employees are ap- 
pointed by the factory councils which the law of February, 
1920, provided should be organized in every factory employing 
more than twenty workmen "to represent the employees' in- 
terests and to collaborate with the employers in the interests 
of general efficiency." 

Present and Future Development 

Since 1919, three subsidiary trusts covering coal, iron, 
and potash have been organized and are in full operation. 
A paper trust is being worked out, and the initial organization 
has been effected by the syndicating of chemicals, textiles, 
pottery, and some thirty other industries, although they do 
not exist yet as subsidiary trusts except upon the organization 
chart in the Ministry of Industry. Foreign trade departments 
have already been organized for all twenty subsidiary trusts. 
It may be some years before the subsidiary trusts are com- 
pletely organized vertically and horizontally and the All- 
German Trust is functioning fully, as the task is stupendous. 
So far, however, all the work has proceeded as per schedule 
with the hearty assistance and co-operation of both employer 
and employee. 



ORGANIZATION 



55 



Inquiry Dept. 

>Advance Estimate Dept. 



Advanced Calculation 
sets Standards 
(1) 
Sales Dept. 



Bureau of Distribution 
Operating Manager 



Advanced Estimate 
(2) 

Receipt of Order 
(3) 

Manufacturing Dept. 



Bate Setting 
(9) 



Dept. Foreman t 



Distribution of Work Ticke 
(19) 7 

Finish Drawings 




Operating Bureau 



Issue of Mfg. Notice 
(6) 

List of Materials 

Statistical Dept, 
(8) 



iur.eau / 

( 1 2-) ONntirfi tr 



Stocv Room 
(13) 



Work Ticket to 
(19) Payroll Dept. 

Payroll Dept. 
(19) 



(19) Check/P.R. 

Deductions* 



Finish Drawings/ 24 Notice to Stock Room\° utsl j 

Shop J r j "^eturnof unused StockV < 12) Stock Card (>5.) 



Orders to Purchase 
\outside 4 material 




Cashier 



Receiving Dept. 



Post payroll 
(20) 



Testing Purchased 
Material 



Rejections 



Check Bills 



Valuing Materials 
(18) 



Figures Refer to 
Numbers of Forms Used 



"'Actual cost compared 
with standard 
(24) 

Sales Dept. notified of cost 
(25) 



Figure 5. Path of an Order Through the Plant as Scheduled by a 

German Concern 



56 AMERICA VS. EUROPE IN INDUSTRY 

Germany has always excelled in organization. She has 
had the will to work, the patience for detail, and the respect 
for authority that make intricate and smoothly functioning 
organization possible. In this gigantic All-German Trust she 
has crystallized the tendencies of the balance of the industrial 
world for the past decade — the destruction of ruinous com- 
petition, the consolidation for efficiency of operation, and 
workmen's representation in management. With this she has 
combined the financial, the commercial, the diplomatic, and 
the governmental elements. As the civilization of today is 
industrial, the step seems logical. 

Private Consolidation in England 

England's organization has consisted of consolidation of 
various interests of a like nature as the result of private enter- 
prise — as in the case of the Vickers and Lever concerns — 
and, to a less extent, in a development of the vertical trust 
as such syndicates acquired plants performing operations pre- 
vious or subsequent to the main business of the company. 
This has been the result of lessons learned during the war, 
in many cases by officers of such companies seeing for them- 
selves, as members of government control boards, the advan- 
tages of consolidation. One such director of a large steel 
company told me for an hour of his experiences as head of 
such a board, and it was quite evident that many industrial 
Bourbons had learned something and that many lone wolves 
had been taught co-operation. 

Federation of British Industries 

In addition there have developed in England great federa- 
tions of manufacturers — partly as a defense against the con- 
federation of trade unions and partly for such purposes as 
to control prices and carry on export business. The largest, 
the Federation of British Industries, was created in 191 7 by 



ORGANIZATION 57 

the manufacturers of Great Britain "with the object of bring- 
ing all manufacturers together in order to deal collectively 
with all matters affecting industry at home and in order to 
assist manufacturers in developing markets abroad for the 
absorption of British products." It is also doing certain 
standardization work, such as the introduction of uniform 
cost systems and of fuel conservation methods. "The federa- 
tion is probably the largest commercial organization in the 
world formed for the mutual benefit of its individual members 
and has come to be recognized by the government as the 
authoritative voice for industry as a whole." It possesses a 
statistical department, arranges passports and introductions 
to members traveling abroad, and arranges exhibitions or fairs 
for the development of new markets and the stimulation of old 
ones. It is interesting to note that the Federation of* British 
Industries concentrates exclusively on manufacture and trade 
matters and avoids labor questions, feeling that such a position 
is more consistent with its position as adviser to the govern- 
ment. 

In a recent authoritative outline of the activities of the 
federation the two following significant statements will be 
found : 

The first results of the great effort of the United States 
to capture the foreign markets of the world are beginning 
to manifest themselves. 

No one who knows the industry, application, and capacity 
for organization of the German manufacturer can believe 
that it will be long before Germany is again making a 
serious bid for world trade in spite of overwhelming diffi- 
culties at present confronting her. There is also to be con- 
sidered the rising power of Japan as a commercial and 
industrial competitor in all markets. The position through- 
out the whole world at the present time is an artificial one, 
and should not blind anyone to the facts of the position as 
they really exist. 



58 AMERICA VS. EUROPE IN INDUSTRY 

National Confederation of Employers' Organizations 

In addition to the Federation of British Industries, which, 
as we have said, follows a policy of aloofness from labor 
questions, an organization was formed in 1919 to represent 
the employers in labor disputes as to wages, hours, and the 
like, known as the National Confederation of Employers' 
Organizations. This is in liaison with the F, B. I. through 
a joint committee which meets fortnightly. The N. C. E. O. 
represents the employers' interests as such and is frankly a 
fighting organization. Its executive committee is made up 
of representatives of the following twelve trades : agriculture ; 
building ; building materials ; clothing trades ; engineering, 
shipbuilding, and metal trades; food; mining and quarries; 
miscellaneous trades (chemicals, china, drink, gas, electricity, 
and water, glass, laundries, leather, musical instruments, 
rubber, tobacco, etc. ) ; paper, printing, and stationery trades ; 
textiles ; transport trades ; and woodworking and furnishing 
trades. Subsidiary to this is of course, the multitude of em- 
ployers' associations which have grown up through years of 
conflict with organized labor. 

Labor Organizations 

Opposed to the N. C. E. O. is the Triple Alliance — con- 
sisting of the miners, railway men, and transport workers 
and some dozens of separate unions which are classified into 
twelve divisions similar to those adopted by the employers. 
These organizations are formed to protect the workers from 
exploitation and to secure adequate wages and healthful work- 
ing conditions for their members rather than to increase the 
efficiency of national industry. The Whitley committees 
which have been organized in a number of plants were formed 
principally to cover such local grievances as can be handled 
best on the ground rather than by reference back to some 
ten or fifteen labor union headquarters. Although the 



ORGANIZATION 59 

Whitley plan calls for the organization of committees repre- 
senting classes of industry and British industry as a whole, 
in addition to the local shop committees, very little has yet 
been done to carry out such phases of the scheme. 

Conciliatory Organizations 

The Government Industrial Board, which existed during 
the war for the purpose of settling disputes between employers 
and employees, was notified by the employers in June, 1920, 
that they would no longer abide by its decisions. Neither 
the masters nor the men were satisfied with its decisions and 
so it went the way of our own Labor Board. Later in the 
summer there was a strong agitation against the government 
employment agencies which seemed about to follow into ob- 
livion those which were created in the United States during 
the war. 

There are a number of leagues, councils, unions, founda- 
tions, and the like formed to promote harmony between em- 
ployer and employee. While they are valuable in teaching 
each class that the other consists of human beings like them- 
selves and possess considerable educational value which will 
undoubtedly eventually bear fruit, they are rather debating 
societies than a part of any great comprehensive plan. 

Wage Standardization 

Organizations for wage standardization exist in both Ger- 
many and England. In England wages are fixed for industry 
by trade boards and all employers must conform to the stand- 
ards set under penalty of a fine — not exceeding £20 for each 
offense. The trade boards are under the direction of the 
Minister of Labor, who gives notice that wage disputes are 
coming up for consideration and calls for a written statement 
of objections to tentative changes as set forth in "Draft Spe- 
cial Orders." The activities of the trade board, however, 



60 AMERICA VS. EUROPE IN INDUSTRY 

cover only a part of the disputes regarding wages and hours 
which are fought out also by strikes, arbitration, conciliation, 
sliding scale agreements, and in as many ways as they are 
settled in America. The tendency is naturally toward a 
standard minimum wage for industries by districts, as in 
America — unlimited competition for workmen during a labor 
shortage having been generally found during the war to result 
in the workers spending their time in traveling rather than 
working, with consequent loss of production and increase in 
cost of manufacture. 

The tendency through the industrial''* world seems to be 
toward the standardization of wages. In Germany wage 
agreements have been legalized since the war and cannot be 
altered by individual contracts between employer and em- 
ployee. Such agreements govern the various industries as a 
whole and district rates, covering every class of work, are 
officially printed for general reference, just as wages adopted 
in England are published in the Labour Gazette of the Ministry 
of Labour. In America the Department of Labor Statistics 
Monthly Labor Review and in France U Information carry 
news of current rates, although wage standardization is not 
as general and as firmly fixed as in Germany and England. 
So far Germany and England have led in the movement by 
making wage agreements universal throughout each industry 
by law with penalties for violation. In America manufac- 
turers are as yet trying to accomplish the same end by moral 
suasion and coercion in each locality. 

Consolidation in France 

In France the consolidation of industry has followed much 
the same lines as in America. There are interlocking direc- 
torates and financial institutions, which control groups of 
industries. There are also institutes and societies similar to 
our own Steel Institute and various trade associations which 



ORGANIZATION 6l 

meet to discuss technical matters and conditions affecting the 
trade. Price-fixing is not generally illegal abroad so that such 
organizations have officially somewhat more force than those 
which crouch under the aegis of the Sherman Anti-Trust Law. 
In France such organizations are usually called "syndicate 
councils" and are formed under the Law of March, 1884, 
"for the defense of industrial, commercial, and economic in- 
terests." One such, covering shipbuilding, represents 30 com- 
panies whose combined capital amounts to over 300,000,000 
francs and there are others covering constructors of railway 
material and the like. The vertical trust and large syndication 
are the result of private initiative, as in Italy, England, and 
America. 

Consolidation in Italy 

In Italy conditions are very similar to those in France. 
Italy has, however, gone in for associations covering general 
industries in half a score of provinces equipped with elaborate 
statistical departments and directed by men of exceptional 
ability. Consolidation both horizontally and vertically — so 
far as Italy possessed the raw materials — has taken place very 
rapidly since the war started. Owing to the fact that some 
of the banks were under German influence and because Italy 
had depended upon the Central Empires to a large extent for 
manufactured goods and for transportation by water, when 
the war started it became necessary to build from the bottom. 
In consequence no time was lost clearing away old institu- 
tions and the result is in many cases more effective than would 
have been the case if existing institutions had required change 
in the face of ultra-conservatism. Modern industrial Italy 
has all the virility and progressiveness of a western American 
community unhampered by tradition, because her large indus- 
tries are the creation of the past few years. 

The Hydro-Electric Trust, composed of ten power com* 



62 AMERICA VS. EUROPE IN INDUSTRY 

panies, is a good example of modern Italian organizing ability. 
This syndicate has certain unique features. All ten companies 
underwrite the syndicate and are responsible for such obliga^ 
tions as it assumes. Up to 50 per cent of the capital can be 
subscribed for by aliens, but if any one power company secures 
control of the syndicate it is automatically forced to sell such 
control to the other members of the pool. Ten million lire 
have been subscribed to a general fund to carry on the busi- 
ness of the syndicate and for research work — such as a survey 
covering the electrification of railways. 

Protection of Stockholders 

In Italy, by means of certain safeguards, the interests of 
stockholders of a company are protected by careful govern- 
ment investigation not only at its inception but continually. 
In the first place all letterheads must show both the authorized 
and the paid-in capital. The courts must have proof as to 
these points before the company can operate. The capitali- 
zation must be reduced if assets are depleted — by fire, for 
instance. The company's affairs are controlled by a board 
of directors and a board of comptrollers, the latter body 
being responsible to the federal court, and being required to 
be present at every board meeting and to report irregularities 
to the court. Comptrollers can have no personal interest in 
the business. They are usually government officials and 
trained engineers, public accountants, or lawyers. For the 
protection of the public, legislation has also been enacted limit- 
ing the earnings of corporations to 8 per cent on the in- 
vestment. 

In England the professional company secretary represents 
and furnishes protection to the stockholder in a manner some- 
what similar to that of the Italian comptroller, although to a 
much less degree and in an unofficial capacity. Professional 
company secretaries are chartered public accountants and 



ORGANIZATION 63 

are thoroughly experienced in corporation procedure. They 
usually act as secretaries of the board of directors and are 
present at all board meetings. Inasmuch as they are disinter- 
ested financially and are professional men serving a number 
of companies whose livelihood depends upon their reputation 
for integrity, it is to their interest to prevent irregularities as 
well as to advise the directors as to the most advantageous 
methods to follow in such matters as refinancing and reorgan- 
ization. In America the corporation lawyer and the certified 
public accountant furnish the information which in England 
comes from the professional secretary, but our system fails 
to protect the small stockholder and encourages the tendency 
to consult the expert after the damage is done, while the 
British plan — since it furnishes continuous service amount- 
ing almost to supervision — anticipates difficulties and prevents 
mistakes. Both Italian and British plans aid distinctly in 
marketing industrial securities; the presence of a disinterested 
participant at all times tends to insure the security of the 
capital invested and the investing public is not so much at 
the mercy of the company officers or of a bank interested 
principally in securing a good commission for disposing of 
the securities. 

Authority for Signature 

In Germany there is a corporation official known as a 
"Prokurist," who is granted a general power of attorney 
and whose signature is required upon certain sorts of letters 
and contracts. His powers are strictly limited but his signa- 
ture possesses a certain definite authority often lacking in such 
documents in America. Furthermore it insures important 
matters being passed upon by one in authority. Under our 
own loose system one never knows whether to return an 
important letter for the signature of the president of the cor- 
poration, and he, on the other hand, never knows to what 



64 AMERICA VS. EUROPE IN INDUSTRY 

some minor clerk may inadvertently be committing the com- 
pany under the principal-and-agent or master-and-servant 
legal clauses. It is unquestionably well worth while to have 
it definitely understood in every corporation who may sign 
each sort of letters. While we have no laws that compel 
recipients of letters to see that such regulations are complied 
with, serious mistakes can very often be avoided by having it 
definitely understood within the plant who has authority to 
sign certain sorts of letters. 

Limited Earnings 

While in America there has been no general legislation 
to limit the earnings of corporations, nevertheless there has 
been a tendency in that direction, as in England in the excess 
profits penalizations, in the grading of income tax charges, 
and in fixing the rates which can be charged by public utilities. 
One large American corporation has set a definite limit on 
its earnings — of 8 per cent on the invested capital — after 
which all earnings, after certain reserves are set aside, are 
paid to the workmen in the form of wages. As a result of 
this policy the company increased the price of its product only 
14 per cent during the war and its cost of production only 
10 per cent, even though the cost of materials increased 
over 50 per cent and the average weekly wage was increased 
from 14.04 to 32.44 per man. This company maintained a 
labor turnover of less than 20 per cent, while other similar 
plants in the same district had turnovers of 300 and 400 per 
cent, and during the slump in the motor industry at the end of 
1920 this company continued in full operation and disposed of 
its product. One of the unique features of this organization 
is the education of its employees to a thorough understanding 
of the principles underlying the business and of its monthly 
statements. A similar provision occurs in the German Works 
Council Law of February, 1920, which requires that the heads 



ORGANIZATION 65 

of establishments employing 300 workmen must regularly 
furnish and explain a financial statement to their employees. 

Corporate Organization Abroad 

The great impersonal corporation exists in each country 
and in general the English "Limited Company," the French 
"Societe Anonyme," the Italian "Societa Anonima," and the 
German "Gesellschaft" follow similar lines. For some years 
the British have distinguished between the administrative 
and the executive branches of control, the former term being 
used to designate those devising policies and the latter those 
who carry them out, much in the same way as in the armies 
of all countries there exists a staff and a line organization. 
In the German corporation the board of directors is divided 
similarly into the Aufsichrat and the Vorstand. In Italy the 
president of the company is usually some distinguished citizen 
willing to lend his name to the enterprise, much as titled Eng- 
lishmen used to serve as company directors. The amount of 
administrative work done by such men depends, of course, 
upon their business experience and upon their interest in the 
business. The Italian "president" heads a distinguished board 
of directors, who together are known as the "administrative 
council." The actual conduct of the business — administrative 
and executive — is in charge of "the direction," which usually 
consists of one or two men whose powers are similar 
to those of the American who holds the title of "president 
and general manager." In some cases the "president" cor- 
responds to our own chairman of the board, although the 
position is more likely to be filled with a distinguished name 
than — as is the case with us — by a retired owner or by a chief 
stockholder who wishes to take up golf and spend his winters 
in California. In France a great many corporations are 
family affairs and are run on patriarchal lines, much as some 
of our New England textile plants are managed, although 



66 AMERICA VS. EUROPE IN INDUSTRY 

the form of organization is similar to our corporate organiza- 
tion. 

In England the directors are commonly in actual charge 
of various departments of the business. One will have charge 
of manufacturing, another of sales, another of finance and 
accounting, etc. These men are almost always heavy stock- 
holders — very often through inheritance — and seem to work 
together in amity with about equal authority — each one attend- 
ing to his own affairs. In England the gap between a director 
and a man who comes up from the ranks is much greater and 
much more, difficult to bridge than that between one of our 
own assistant heads of departments and his chief. In fact 
there is usually an atmosphere of the Holy of Holies about 
the directors' room in an English plant — as to those who 
occupy it — because it is really used for something besides show 
and a perfunctory monthly meeting — as to the daily luncheon 
that is served there — and as to the momentous decisions which 
are reached therein. To an outsider it is principally note- 
worthy for its clubby atmosphere, for the charming hospitality 
of those who occupy it for an hour or so at midday, and for 
its invariably excellent Scotch. 

To some extent English directors are similar to our own 
working vice-presidents. Their positions are somewhat better 
defined, however, and there is less difference in rank between 
them and the managing director than between our vice-presi- 
dents and the president of the company. Our president is an 
autocrat, is surrounded by his own staff, and calls upon his 
vice-presidents for information or to receive instructions. 
The English board is more of a partnership affair — much 
more easy-going and democratic with the democracy of the 
true aristocrat. Their positions are assured and fixed, which 
largely eliminates industrial politics and makes for self-con- 
fidence and conservatism. 

In the largest companies in England the managing director 



ORGANIZATION 67 

is more like our own president and general manager, supported 
by sales managers, work managers, and financial managers 
appointed by him from the best available material. This makes 
for progress and the high type of personal efficiency which 
develops only under the spur of competition. Our system 
puts almost unlimited power in the hands of our company 
presidents but it is a very good one for getting things done. 
In the case of the larger British consolidations, directors from 
each organization serve on the general board. This corre- 
sponds in a measure to the arrangement in certain large Amer- 
ican syndicates where the president of one of the larger units 
serves as president of the whole and the other presidents con- 
stitute the general board of directors. However, the form 
of organization is not important provided it furnishes a 
proper stimulus to effective effort. That and the ability — 
administrative and executive — of the men responsible for 
the conduct of the undertaking are what determine its success. 

Increased Desire for Facts 

A particularly interesting development of the war has 
been the general realization of a need for facts upon which 
to base industrial administrative policy. When in June, 1920, 
the International Chamber of Commerce was founded in Paris 
the commercial organizations of America, England, France, 
Belgium, and Italy were consolidated for the purpose of secur- 
ing and exchanging facts — in regard to supplies of raw mate- 
rials and of manufactured goods, in regard to shipping and 
docking facilities, and in regard to industrial and commercial 
conditions generally. Furthermore, the development of gov- 
ernmental foreign trade departments has been much stimulated, 
partly because of the entire change in the economic and political 
balance of Europe and partly because the citizens of the world 
during the war discovered the value of pooled authoritative 
information. 



68 AMERICA VS. EUROPE IN INDUSTRY 

There has been a similar increase in the desire for technical 
information. We have already mentioned the part played by 
research in the German economic plan. Similar work is being 
conducted by. the great syndicates, such as that of the iron 
industry, which supports an "Institute for the Scientific 
Research of Iron." In America we, of course, have the Rocke- 
feller and Carnegie foundations, the Mellon Institute, and 
numerous university laboratories doing research work of 
various sorts; as well as the laboratories supported by asso- 
ciations of manufacturers and by the government — those, for 
instance, at the Arsenal in Pittsburgh and under the direction 
of the Bureau of Standards at Washington. In England there 
has also been a movement to make the factory control of the 
product a function of the research laboratory. 

Commercial Exhibitions 

Another development which may have a large influence 
on sales organization is the recent increase in the number of 
commercial exhibitions and fairs. The British government 
is sending such touring exhibitions to its dominions, to South 
America, the United States, India, and the Far East. The 
French fair at Lyons and fairs at* various other European 
commercial centers have been in existence for a very long 
time, but it is only recently that the Bush Building in New 
York furnished Americans an opportunity to buy generally 
under one roof. The style shows, such as that held annually 
in the Forest Park open-air theater at St. Louis, are another 
development along this line. In England a building similar 
to the Bush Building is being erected at Aldwych near the 
Strand. On the whole it almost looks as if the world were 
beginning to realize the terrific waste of shipping thousands 
of high-priced salesmen across the continent in pullmans to 
spend a large part of their time waiting in anterooms, in 
expensive hotels, and in railroad stations. 



ORGANIZATION 69 

A New Civilization 

To the man who visited Europe before the war and 
returned with an impression of stuffy little concerns, jealously 
guarded from visitors and operated under inherited traditions 
of extreme antiquity, the change is incredible. Education is 
always expensive but it would be strange if from so cataclysmic 
an experience as five years of world war the lessons learned 
were not correspondingly great. For some fifteen thousand 
years — until the dawn of the Steam Age in the eighteenth cen- 
tury — the progress in the life of mankind, physical and mental, 
consisted of refinements of what already existed. It has been 
given to us to witness the formation of a new civilization. The 
transition from manual labor, sailing ships, and animal trans- 
portation to machinery, internal combustion engines, and elec- 
trical communication has substituted city dwelling for the 
century-old life in the open and has made physical exercise 
unnecessary to existence. So complete a change in the manner 
of living has tried to the utmost an organism created for a 
certain environment through ages of evolution. Each clan 
and each district has reacted to the stimulus in a different 
manner. Each factory has developed its own tradition, with 
principles, methods, and morals as different as those which 
existed under each robber baron in the feudal castles which 
dotted the plains of Europe in medieval times. Each petty 
tyrant has guarded his holdings jealously and his vassals have 
fared well or ill in proportion as nature created him wise, 
predatory, or merely a weak inheritor of what abler men had 
created. 

Under such intense individualism and comparative isolation 
progress was necessarily slow. Each manufacturer devised 
his own methods. If fortune favored him he taught his little 
tricks to his son as business secrets of incalculable value. 
When the eddies of civilization carried his trade elsewhere he 
ceased to exist or his fief was acquired by an abler lord. 



70 



AMERICA VS. EUROPE IN INDUSTRY 



As time went on certain business principles were developed — 
a piece here and a fragment there. But there was no general 
pooling of knowledge. Men of deep insight and broad know- 
ledge were too busy to teach others. Fools are seldom grateful 
for gratuitous advice and it is easier to let them fry in their 
own fat. Meantime waste and the cruelty of ignorance were 
rife in the land. 

Then came the war — not a war of muscle and sturdy blows 
but a war of machines. Whole peoples went forth to fight. 
Every ounce of strength of every woman, almost of every 
child, multiplied a hundred fold by the use of machinery, was 
needed at home to furnish materials for the two double lines 
of men who faced each other across the civilized world — 
from the Baltic to the Red Sea and from the North Sea to 
the Adriatic. It was not a time for conservatism. Trade 
secrets went by the board. In England, in France, in Italy, 
in Russia, and in America the best that industrial minds had 
learned in a century of the new era was poured into the lap 
of the sore-tried Entente in its struggle against the organiza- 
tion, the materials, and the inventions that the Central Empires 
had piled up during half a century. Waste became a crime. 
Standard methods were devised and enforced. The most 
able men headed the government war boards and became 
teachers to industry at large — teachers whose pupils heeded 
their precepts or who disappeared from the control of what 
they owned. So it went on for nearly five agonizing years. 

The lessons of organization learned by the world's cap- 
tains of industry are now going into effect. Wasteful compe- 
tition is giving place to consolidation. Knowledge is being 
pooled. Industry has been recognized as an affair of the 
people to be administered in the interest of the public good. 
We have recognized ourselves as an industrial world bound 
together by common interests. 



CHAPTER IV 

EUROPEAN AND AMERICAN LABOR 

Labor and Human Nature 

Labor is human nature. This is sometimes hard 
to remember while professional uplifters sob forth its wrongs 
and when bitter old men advocate hanging its leaders to 
lamp-posts. As a matter of fact neither one is right — as any- 
one who has carried a dinner bucket and experienced real 
manual labor knows. Labor is just the raw material. Most 
of it remains raw material, but some of it — owing to its 
environment and the virtues of its ancestors — gets worked up 
into millionaires, preachers, engineers, and professors. It is 
not as highly polished — either internally or externally as the 
finished product, but fundamentally it is the same. It has 
a nose, two eyes, and two legs and it averages quite as selfish 
and quite as big a grafter — if it gets the chance — as the highly 
manicured and silk-hatted finished product which rides to work 
in a limousine. It is not necessarily unwashed because it wears 
a flannel shirt and it is quite as smart in its own province and 
quite as interesting to talk to as its brother with more clothes 
and more money. When it gets very angry it forms a howling 
mot) — but that is just because there is so much of it and it is 
so raw and elemental. What it accomplishes is not very dif- 
ferent from what the finished product does when it gets equally 
angry, except that there is less finish about the method. 

The fundamental difference between European labor and 
American labor is that abroad labor expects to have to remain 
in the class in which it was born, and makes arrangements 
accordingly, while in America we all hope eventually to become 
millionaires and are not so much interested in changing the 

7 1 



y 2 AMERICA VS. EUROPE IN INDUSTRY 

organization of society. Here we feel much the same as does 
the casual sojourner in a city — he doesn't care if the pave- 
ments are bad and if the police force are grafters — he expects 
to move on. But when you've got to live in a town — and drive 
the family flivver over those holes in the road four times a 
day and your sons are invading the dance halls — then you 
start in to take an interest in politics. 

A Proletariat Class in Europe 

This is due partly, of course, to our greater natural 
resources and Europe's overpopulation which makes it easier 
to rise in the social scale in America. But it is also due to the 
greater physical and mental contrast abroad between the 
ruling classes and the proletariat than between the leaders 
and the followers here. We must remember that the members 
of the European lower classes who come to America repre- 
sent the flower of their class — the ambitious, the courageous, 
and the adaptable. In France the lower middle class regard 
the peasants as almost of a different race. In Italy I was 
told that a peasant woman was as impossible a house servant 
as the proverbial bull in a china shop. I have talked to Eng- 
lish farm laborers whose mental processes were not much 
more alert than those of the cattle which they tended and 
certain bucolic Germans are as woodenheaded as the toys 
they carve in the winter. 

Furthermore, in Europe, those on top have been looking 
down and those below have been looking up for a very long 
time. The lower classes "know their place." They have not 
been taught that one man is as good as another. Even the 
dress of the various classes differs. An Englishman com- 
plained to me that in America he could tell neither a man's 
class nor his profession by his clothes. Here, in the matter 
of dress, Fifth Avenue is the standard for all of us. Abroad 
even the features and the physique of the classes differ. A 



EUROPEAN AND AMERICAN LABOR 73 

friend of mine endeavored to introduce scientific management 
into a British factory. Immediately London was wired for 
union officials. That night in the labor hall their climactic 
exhortation was — "The chest of the British laboring man 
averages twenty-nine inches. The chest of the British factory- 
owner averages thirty-nine inches. Are you men going to 
stand for any system that takes more inches off of your chest 
and puts it on to his?" And then amid overwhelming and 
vociferous cries of "No!" "Never!!" and "We'll die first. 
Britons never shall be slaves !" scientific management was 
hurled into oblivion. 

Those of us who saw the Liverpool, the Manchester, and 
the Glasgow workmen entraining for the training camps in 
August, 1914, will never forget the ill-shapen bodies, the bad 
teeth, and the horrible complexions of those men. In 1920 
I was told that one reason for the food shortage in Italy was 
because the Italian had learned to eat a square meal in the 
army during the war. I have never seen such murderous look- 
ing children as the boys of fourteen and less who work in 
the steel plants of England, where, until the passage of certain 
much needed child labor laws, 1 the motto was "catch 'em 
young and treat 'em rough." 

Lack of Opportunity Abroad 

A man who loses his income abroad is finished. He 
knows that it is almost impossible for him to get a fresh start. 
Holding to that which is yours is almost an element of sur- 
vival — and that makes for a hardness which seems cruel to 
the free-handed generosity of a more fruitful land. People 
poverty-stricken until they worry about the propinquity of 
the point at which the fittest cease to survive, do not feel 
that they can afford to indulge in the grand gesture and the 



Education Acts of 1918 abolished full-time employment of children under fourteen 
and made compulsory the attendance of young persons under sixteen at continuation 
schools for 320 hours a year. 



74 AMERICA VS. EUROPE IN INDUSTRY 

generous impulse of grand seigniors, whose estates adjoin — 
or of the more fortunate born to equal opportunity in a 
country where poverty is an incident and not a fate. We 
have no right, therefore, to criticize lower class Europeans 
because they are grasping or for dreaming dreams which seem 
preposterous in America. After all is said and done the 
most obvious solution is that offered by a certain gentleman 
with a long upper lip who, after giving the matter some 
hours of consideration, burst forth with, "An' shure the 
only way for a laborin' man to succeed in Oirland is to go 
to Ameriky." 

Economic Evolution 

Furthermore the background is different. Since 1620, 
even until today, the American who has felt that the com- 
munity is holding him under has had only to move a little 
further on, into the sparsely settled lands, to become the 
master. We have had three hundred years of that and the 
training tells. In Europe slavery began before recorded his- 
tory. Slavery to individuals was followed by vassalage to 
feudal lords. Even yet "economic slavery" is a term which 
describes what is a bitter reality abroad as compared with 
America. Their only way out — except for emigration — is 
economic evolution, and that is what European labor means 
to have now. 

It was very nice for the upper classes to be able to bestow 
a lira, a franc, or a shilling without missing it, and to have 
it mean so much to the recipient that he would fairly grovel 
with gratitude. Most of that disappeared during the war. 
The rise in prices cut the power of the rentier class and the 
rise in wages and the shortage of labor increased the power 
of the laboring class, and there was a marked decrease in 
groveling. With the pressure somewhat relieved and with 
labor not educated to the difference between the use and the 



EUROPEAN AND AMERICAN LABOR 75 

abuse of power, some bad mistakes have been made. The 
first taste of liberty often results in overindulgence — where- 
upon it becomes license and the after-effect is bitter experience 
and either the attainment of wisdom, or failure to learn and 
final extermination. 

Result in Russia 

America has been horrified with some of the excesses 
committed in the nameof liberty. But we must remember 
that an abused dog is an abnormal dog and that past beatings 
are almost always responsible for his attempts to bite the 
hand that would at last administer either food or encourage- 
ment. And there have been some long, long scores to settle. 
While the people have been learning that overindulgence means 
pain and in consequence learning self-restraint, their leaders 
have been learning their own bitter lessons. A diplomat who 
went through the Russian Revolution told me that the most 
conscience-stricken men in Europe were the Russian intel- 
ligentia who played a part in the Muscovite upheaval similar 
to that played by the Rousseau School in the French Revolu- 
tion and that which our own parlor Bolshevists desire to 
emulate in America. They convinced the mob. Once the 
killings began these intclligentia went around wringing their 
hands in agony crying, "This is awful! When we told the 
proletariat the aristocracy was responsible for this trouble 
and must be crushed we had no idea he would take us literally ! 
We didn't realize how elemental he was! This is terrible!" 
But it was a bit late for remorse. The organizing brains of 
Russia had been scattered upon the pavements of Petrograd 
and Moscow or had fled the country. Now the Russian must 
struggle up from the depths unguided, a prey to adventurers, 
paying with blood and sweat for his ignorance and for the 
impractical and impossible dreams of well-meaning irre- 
sponsibles. 




7 6 AMERICA VS. EUROPE IN INDUSTRY 

Conditions in Italy 

The lesson has been a bitter one but it is not without its 
value to the rest of us. While I was in Italy a delegation of 
Italian Bolshevists returned from Russia. Their Italian com- 
rades had awaited their arrival eagerly for news of the millen- 
nium "now that the real truth was for once allowed to emerge 
from Russia." They were silent for nearly three weeks and 
then the Red press stated that — "while it was true that the 
proletariat was doing little, if any, work in Russia it was all 
the fault of the former capitalistic class who had not taught 
them to work !" The news cheered my traveling companions 
greatly, who felt that now that the faults of human nature 
were being ascribed to capital, the reductio ad absurdum was 
not far distant. 

It came in Italy in August. While I was there in July 
the pink stucco walls in the industrial villages, in Ferrara 
and in Milan, were everywhere decorated with that double 
V — which, when right side up means "Long live" and when 
upside down means "Down with" — followed by various words 
which translate into "Long live the Republic of the Soviet!" 
"Long live the Revolution!" "Long live Trotski !" "Long 
live Lenine!" "Down with War!" "Soldiers be with us for 
the Social Revolution." One scribbler even had time for a 
"Viva Flume Italiano!" The province of Ferrara was then 
supposed to be in a state of insurrection, although a few ber- 
saglieri in steel helmets mounted on motor bikes were the only 
visible signs of any disturbance and this meant little as soldiers 
are likely to be encountered almost anywhere in Europe. In 
going through the factories the shop spirit of the workers 
seemed good. No black looks were directed toward our 
conductors and everyone seemed peaceful and contented. 
But they weren't working very hard. In the largest plant 
we visited we were told there had been only one strike since 
the sixty-day strike of the previous August. This had lasted 



EUROPEAN AND AMERICAN LABOR yy 

three days, one day of which the strikers devoted to banking 
the fires and preparing for the shutdown on their own time. 
We were even told that the output per man was greater than 
before the war in spite of the change from a nine- to an eight- 
hour day — owing to the introduction of improved machines 
and modern methods. The general street-car strike had been 
going on nearly a month — but there was considerable politics 
mixed up with that — and Venice had gone back a century or 
two through the disappearance of the usual ubiquitous motor 
launches whose operators were on strike. The socialists in 
the motor-car industry in Turin in March had demanded that 
workmen's committees be instructed in methods of manage- 
ment — with the idea of taking charge later. The works were 
shut down and a month later the workmen capitulated. 

Political Situation in Italy 

But the political situation had a distinct bearing on the 
case. One of the largest and most progressive manufacturers 
in Italy informed me that in his plants about 10 per cent of 
his workmen were anarchists 2 but that the percentage would 
run higher in some other plants. A little later one of the 
best informed men I encountered in Europe told me that 
Italian workmen split into three divisions — the Catholic unions, 
composed mostly of conservatives to some extent influenced 
by the priests — the socialist unions, made up of atheistic 
men most of whose wives remained Catholics — and the con- 
servatives, who were not unionized. He estimated that 30 
per cent of the workmen belonged to the first division, 30 
per cent to the second, and 40 per cent to the last. These 
unions merge into the political parties in a way not usual in 
England or America. The Liberal Party in power in 1920 — 
by about a three-fifths majority — was composed of about 55 
per cent socialists, half of whom were for gradual peaceful 



2 See definitions of various sorts of radicals in Appendix A. 



yS AMERICA VS. EUROPE IN INDUSTRY 

revolution and half of whom demanded the Soviet at once. 
The Popular Party, which consisted of the Catholic unions 
and their sympathizers and had just appeared as a political 
party, represented about 35 per cent of the party in power. 
The Republican Party (5 per cent) wanted a political republic 
like America and the Reformed Socialist Party (5 per cent) 
had a particular brand of conservative socialism similar to the 
radical socialists in France. Plant superintendents and others 
who were in a more or less neutral position between employer 
and employee told me in July that they felt the trouble had 
just about reached a climax. They had faith in the basic 
common sense of the workmen but they stated that a lot of 
older manufacturers were pretty reactionary and despotic— 
which might lead to trouble. Altogether it seemed as if the 
stage were pretty well set for a flare-up of some sort in the 
near future. The explosion occurred in August. 

Industrial Uprising 

After a period of passive strikes — "No Overtime," "Ca' 
Canny," or systematic soldiering, "Work to Rule" (a type 
somewhat serious in Italy where the great number of sanitary 
and workers' protection laws are too perfect to permit at the 
same time complete enforcement and the performance of any- 
thing like a day's work) — output in the metal trades was 
decreased, first 30 and then 50 per cent. Then the great 
Romaio foundry of Milan suddenly decreed a lockout. When 
the men came to work they found the plant occupied by gend- 
armes with machine guns. That night there was a general 
conference of employers and employees before the Prefect. 
The employers had agreed upon a general lockout and felt 
they held the trump card. As the debate waxed strong mes- 
senger after messenger hurried in with telegrams which the 
Prefect read to himself with an impassive face. At last the 
employers decided to deliver their ultimatum. As their spokes- 



EUROPEAN AND AMERICAN LABOR 79 

man rose the Prefect held up his hand — "It seems that we are 
playing at cross-purposes, gentlemen," he said calmly. "The 
workmen have this evening seized all the factories in the dis- 
trict." This was the first news the employers had received 
of the steps taken by the Committee of Action which had that 
night occupied by force over 300 factories. Within a few 
days the number swelled to over 2,000, well fortified with 
barbed wire and machine guns. 

The employers called for troops and gendarmes. The 
government, which, as we have seen, was 55 per cent social- 
istic, which counted upon the unpopularity of profiteers, and 
which needed the taxes which they felt a sight of the company 
books would give them, refused to interfere. The men slept 
in the plants and in some cases output rose 20 to 30 per cent. 
Discipline was strict. In some cases men were actually dis- 
charged. Raw materials were seized in transit and at the 
mines. A general sales bureau was created in Milan. 

But it is sometimes easier to steal an automobile than 
to run it. Difficulties were developing. Although in some 
cases the technical staff had remained at the plant, it was 
discovered that there was a thing called "management." The 
workmen found they had to meet problems of policy and 
administration which they were incapable of solving — that 
they had taken over a great commercial machine which they 
could not operate. In cases where the goods could be sold it 
was found that instead of the immense profits which the men 
expected there was a deficit — that there was not even enough to 
pay the old wages — that operated without skilled management 
the properties were insolvent. They found that workmen were 
not equipped to do what the capitalist could do. They began 
to realize that there is a raison d'etre for the capitalist — the 
skilled administrator — that he is an asset to the community 
and that he is quite as worthy of wages as the man who sweats 
over a machine for a living. People were afraid to buy the 



80 AMERICA VS. EUROPE IN INDUSTRY 

output of the seized factories, doubting the legality of such 
sales. Producers were afraid to sell the factories raw materials 
— for fear they could not collect what was due them. It became 
evident that it was time to climb down. 

Defeat of Bolshevism 

On the ioth of September a great meeting of the General 
Trade Union Council was held in Milan to decide what 
should be done — whether all industries should be seized or 
whether they should proceed to negotiate. The vote was 6 to 4 
in favor of negotiation, which meant the defeat of Bolshevism 
in Italy. On the 15th representatives met with Premier Giolitti 
in Rome. As a result the famous "Decreto" was published, 
in which the right of workers to participate in the financial 
and economic affairs of all factories of Italy and the creation 
of factory councils on these lines was decreed and a committee 
appointed to work out practical ways and means. The factories 
were then returned to the owners amid great general rejoicing. 
The men secured a raise of 4 lire a day but no back pay for the 
strike period, were conceded an annual week's holiday with 
pay, and went back to work with the mot d'ordre — in the 
words of Avanti, the radical paper — of "Produce cheap and 
much — afterwards we shall see." 

Steps in Development of Bolshevism 

I have given a detailed account of the adventure in Italy 
because it is indicative of the trend throughout the industrial 
world and because the experiment was closely watched by 
capital and labor. It represents the logical course of events 
where a well-informed, educated, and sensible people are 
attacked by the virus of Bolshevism while weakened by war 
and by the presence of Bourbonism in the administrative class. 
A less intelligent democracy would have plunged Italy into 
disaster more terrible than that which has overtaken Russia, 



EUROPEAN AND AMERICAN LABOR 8l 

because a large proportion of the people in Italy are dependent 
upon the successful administration of industry. The steps 
in the disease as it attacks an industrial nation may be enumer- 
ated as follows : 

1. Overconfidence of the manual worker, due to the 

demand for his services during the war. 

2. Desire for the millennium — inherent in most members 

of the human race. Belief on the part of the igno- 
rant that such a millennium has been established in 
Russia by the use of a certain Soviet system and 
that the same millennium can be reproduced else- 
where by the same methods. 

3. Unrest, due to the return from war to work and the 

general industrial reorganization occasioned by a 
change of the world from a war to a peace basis. 

4. Agitation upon the part of well-meaning but inexperi- 

enced idealists and by the "have nots" who hope 
to join the ranks of the "haves" by the overturn 
of the existing apple cart. 

5. Autocratic assertion of power on the part of industrial 

Bourbons, who believe that pre-war conditions can 
be forced by rough treatment and that war profits 
must be maintained. 

6. Revolt of the conservative workmen under this 

treatment. 

7. An experiment with the Soviet form of industrial 

control. 

8. Discovery of the value of management and the 

exposure of certain socialistic fallacies. 

9. A healthy lesson for the Bourbons and for the radicals 

— each discovering that it doesn't pay to carry 
things too far — and that co-operation is necessary 
to success. 



82 AMERICA VS. EUROPE IN INDUSTRY 

10. Concessions on both sides. 

11. Recognition of the fact that industry is a mutual inter- 

est and that the owners and the workers each have 

the right to a voice in its administration as well as 

a responsibility for its successful, efficient conduct. 

Outbreak in Germany 

In Germany there was a radical demonstration in the spring 
of 1920. In the late autumn — just as certain employers had 
predicted when I talked with them in Berlin — there was 
another outbreak and the workmen, following the Italian lead, 
attempted to seize the factories. But all summer the organizing 
brains of Germany had been at work. The Shop Councils — 
the Betriebsrat — had been perfected. Workmen already had 
a voice in the administration of industry. "Why should they 
join the radicals?" argued the conservatives. So the radicals 
who attempted to emulate the Italian metal-workers were 
thrown into the street by the very efficient Berlin police and 
work went on as before. We have already discussed labor's 
part in the organization of the All-German Trust and we shall 
have more to say in the chapter on shop-government plans. 
In the case of the latter the emphasis placed upon the right 
of participation in management, carrying with it responsibility 
for operating efficiency, is especially significant. 

I witnessed only one strike in Berlin and this was due to a 
misunderstanding as to the interpretation of a rule. The staff 
took it as a matter of course, the mob gathered around the 
director's office was orderly and took the affair phlegmatically, 
except for a few ancient dames of considerable physical mag- 
nitude who sat on the steps and wept copiously. The strike 
was all over in three hours and the shop spirit was excellent 
the next day. In the consideration of all industrial matters, 
due allowance must be made for the inherent love of order 
characteristic of the German nation. 



EUROPEAN AND AMERICAN LABOR 83 

The practical result of the revolution was the increase in 
influence of the laboring classes in the state and economic 
life of the country. The despotic militarist who would "drive 
the workers to their knees and keep them there," still exists — 
I met several of his kind in Berlin — but as the masses learn 
the difference between liberty and license — a distinction which 
the Germans have assimilated with a smoothness and a speed 
not elsewhere paralleled in history — there should be less occa- 
sion for this type of tyrant. Labor seems to be playing its part 
in the development of Germany's big idea — the Organized 
Economic System. If the German laboring classes continue 
to co-operate and the plan is successful, the rest of the world, 
unless it does likewise, will have about as much chance of 
meeting competition as has the one lone grocer or tobacconist 
next to whom the branch of a country-wide chain-store opens. 

Demonstration in France 

In France the outbreak occurred in May, 1920, when pro- 
cessions of Reds paraded and demanded that the workmen 
who remained in the plants should join them. The French 
cavalry dispersed the paraders and the nationalization of 
industry and the one big union idea went into the discard. 
Trade unions are not recognized by the government in France. 
At the time of the railroad strike in the spring of 1920 an 
attempt was made at a general strike — partly as a political 
challenge. The leaders were arrested and meetings were pre- 
vented and legal steps have since been taken to inflict heavy 
penalties for public service strikes. The dissolution of the 
General Federation of Labor was ordered on January 13, 192 1, 
when Leon Jouhaux, president of the federation, and certain 
other officers were fined for infringement of the law governing 
unions. There are practically no closed shops, although most 
plants have some union members. At one of the larger plants 
I was told that about a third of their workmen were Syndical- 



84 AMERICA VS. EUROPE IN INDUSTRY 

ists and that a couple of hundred of them had indulged in an 
unsuccessful strike a short time previously. There are no 
grievance committees and the nearest thing to participation in 
management I could discover was in one of the most progres- 
sive plants, where delegates from each shop have a talk with the 
head of their department once a month. 

The eight-hour day has, however, been decreed by law 
with the same pay for eight hours as was formerly received 
for ten. In some cases the production per hour has increased 
as a result. On account of the man shortage in France there 
is, however, a good deal of overtime. Considerable Chinese 
labor brought in during the war still remains. France is 
also using Russian war prisoners who do not want to go 
home, Algerians, and some Spaniards. 

General Situation in France 

On the whole, the situation in France is peculiar. It is 
very easy to dismiss the lack of unions, of machinery for nego- 
tiation, and of workmen's representation schemes as an evi- 
dence of industrial backwardness and of the survival of feudal- 
ism. One government official in Italy stated that France was 
really a monarchy masquerading as a republic. The European 
representative of one of our largest industries told me big 
business "had everything absolutely sewed up" in France and 
cited the destruction by weather of thousands of American 
war automobiles withheld from sale through the influence of 
French manufacturers who did not want their market ruined. 
Those who inveigh against paternalism — welfare work under 
the direction of the employer — can find plenty of examples in 
France. But such snap judgments are misleading. 

We must remember that France was the mother of modern 
democracy — that what she gave birth to in the eighteenth cen- 
tury and what America adopted then required most of the next 
century to be worked out in Italy and England in the form of 



EUROPEAN AND AMERICAN LABOR 85 

the limited monarchy and that it did not reach Germany and 
Eastern Europe until almost a quarter of the twentieth cen- 
tury had elapsed. We must remember that France is an 
exceedingly well-educated nation and an exceedingly logical 
nation; that doctrines which have swept over loose-thinking 
and sentimental peoples, only to be found harmful in the end, 
have — punctured by her cold and remorseless close thinking — 
passed her by untouched. Furthermore she is not an industrial 
nation as America, England, and Germany are industrial 
nations. A much smaller proportion of her population is 
engaged in manufacture. We must remember also the camer- 
aderie between the French poilu and the French officer — the 
mes enfants and mon garcon — the real democracy that existed 
without loss of discipline, the service in the ranks of all classes 
before, during, and since the war. Most of all we must 
remember that spirit, heart, and character, of master and of 
man is what makes for understanding and co-operations — not 
system and organization. Personally I wish to say this — I 
never saw better shop spirit, better understanding and heartier 
co-operation than very evidently exists between the workmen 
and the executives with whom I traversed some miles of French 
factories. Paternalism may be a crime, but it is a question 
whether the wise industrial fathers of France and their under- 
standing sons are not preferable to the sort of freedom that 
exists where an ignorant mob — unlearned as to where liberty 
ends and license begins — rushes hither and thither at the call 
of the 51 per cent. In any event, French history is pervaded 
with sufficient horrible examples of what happens to despots 
who cease to be benevolent to deter the type of parent who 
exploits his children to their harm. 

Labor Situation in England 

The labor situation in England presents most of the Brit- 
ish virtues and all of the faults. British character seems to 



SS AMERICA VS. EUROPE IN INDUSTRY 

enable them to muddle through somehow under what would 
be hopeless conditions in any other country. The whole thing 
is as full of paradoxes as Gilbert and Sullivan. In the first 
place the country has got to produce cheaply to exist, as two- 
thirds of its foodstuffs must be paid for with profits from 
manufactured articles sold in competition with other countries. 
Are labor and capital co-operating to that end? They are 
not! Labor is loafing on the job from one end of England 
to the other just as it did before the war — holding tight to the 
rule of one machinist to one automatic machine, in spite of the 
fact that one woman operated four during the war and one man 
often operates six in America. Are they going in for multiple 
drills which bore forty or fifty holes at one time? They are 
not! The most multiple drill I could find anywhere at the 
Olympia Exhibition could drill only two holes at a time. 

Labor is organized to the nth degree and is doing every- 
thing possible to hurt the employers. Are the employers sore? 
They are not ! They regard the fight as a sporting proposition 
and applaud heartily every time their opponent gets in a 
skilful body blow. .Red radicals preach in every industrial 
eerier. Do they lock them up? Certainly not. They talk 
about personal liberty. Industrial England is the most drink- 
sodden country in Europe and yet the howl that goes up when 
moderation is mentioned makes you feel as if you were 
filching milk from a child. All that "Father, dear father, 
come home with me now" poetry and "Drunken Husband 
Knocks Wife's Teeth Down Her Throat" head-line stuff that 
never happens in France, Italy, or Germany and which died 
out in America twenty-five years ago, is still going on in 
England. The intelligentia plan the details of the revolution 
and instruct the working man how to act, and about the time 
you expect to see a crimson sky over Berkely Square and the 
city in flames, they explain that what they are describing will 
probably happen eventually — say, in a hundred years or so. 



EUROPEAN AND AMERICAN LABOR 87 

If you don't allow for the fact that the British — both capital 
and labor — possess an immense amount of common sense, 
character, and mutual respect, you are likely to be badly 
deceived. What would be vitriol to another disposition is 
merely a pleasing and stimulating condiment to the palate of 
the phlegmatic Britisher. But whenever he tells you how 
clever you are or how violent or how stupid he is, watch 
what he does — not what he says. If you forget that you will 
find yourself where the Germans did when they expected 
a revolution in England to help them in 1914. The British 
are essentially sound — whatever the surface indications. 

Views of Representative Englishmen 

A series of personal talks which I had with certain labor 
leaders, with men at the heads of large industries, government 
officials at the Ministry of Labour and elsewhere, educators, 
and the like, late in 1920 will perhaps show the situation as it 
exists in England better than anything else. The men were 
thoroughly representative so that the lack of agreement is 
significant. The names of the men are withheld for obvious 
reasons. 

An Economist 

A celebrated economist — a man of title and a practical 
student of industrial conditions in England and in America said 
he felt there might be a reconstruction of the capitalistic system 
within twenty-five years. He did not anticipate bloodshed or 
an immediate revolution of any sort. He stated that the people 
talking revolution were the reactionary owners of medium- 
sized plants who had banded together in certain associations 
and had preached "drive the workmen to their knees" until 
they had been called off by the more broad-minded and far- 
seeing manufacturers. He felt that the responsible heads of 
the great unions did not want strikes, knowing just what suf- 



88 AMERICA VS. EUROPE IN INDUSTRY 

fering such fights entail. He dwelt upon the long experience 
of British labor union leaders and the fact that most manufac- 
turers preferred having such men to deal with when there 
was trouble with their workmen. 

He stated that inasmuch as England must import more 
than half her foodstuffs, it naturally followed that she must 
pay for such food with manufactured goods. The only way 
she could sell such manufactured goods was to meet the 
prices of foreign competitors. The only way she could meet 
such competitive prices was to reduce the cost of manufacture 
by increased production. Limited output, however, was preva- 
lent and was due to the cutting of piece rates in the past and 
to the belief among working men in the "only so much work 
to be done" theory. Under the circumstances the necessity for 
increased production would quite probably have to be demon- 
strated by bitter experience — by loss of jobs forced by the 
shutting down of factories which had lost orders to foreign 
competitors. 

An Editor 

The editor of a technical magazine, thoroughly in touch 
with industrial conditions, told me England produced about 
a third of what she consumed and that they must meet foreign 
competition to secure the other two-thirds. He stated labor 
was convinced that high individual production resulted in 
shutdowns and had for the most part gone back to one auto- 
matic per operator and to limiting production as much as pos- 
sible in every way. Piece work — known in England as "pay- 
ment by results" — is generally opposed by the labor unions. 
In his opinion there had been too much trading between 
manufacturers and workmen, compromise of disputes usually 
taking place on a 50-50 basis regardless of whether the raise 
in wages was justified or not. This had been the easiest way 
for the manufacturer, who, during and since the war, had been 



EUROPEAN AND AMERICAN LABOR 89 

able to pass the increased production cost on to the consumer. 
As a result of this abuse, the consumer had stopped buying, 
employment was increasing, and many expected some sort of 
a revolution. He continued: 

Recently a concerted effort on the part of manufacturers 
has been made, to get in closer personal touch with their 
workmen. Executive offices of several large concerns have 
been moved from London to the cities in which the plants are 
located. 

The workmen are now demanding all of the raise asked 
for as a moral right instead of being satisfied with the 50-50 
compromise. Unfortunately the men have become so in the 
habit of securing every raise asked for and the employers so 
in the habit of climbing down that the latter have lost their 
nerve. The longer the fight is deferred the harder it will be 
for the employers to win it. The men are fairly well edu- 
cated and the majority possess considerable common sense. 
The only question is whether some will not lose their heads 
when the fight begins. 

A University Professor 

A university professor, head of a department in one of the 
large technical colleges and a man of considerable industrial 
experience, told me he did not expect a revolution. However, 
he believed that the people have been so exploited for years 
that they are very suspicious. 

All believe in limiting production but they must get out 
of it. The workmen are intelligent but unbelievably ignor- 
ant — and they are beginning to find that out. To bring the 
workmen, managers, technical staffs, etc., together and to 
educate them mutually, an industrial council has been formed 
in Manchester. Lectures are well attended and intelligently 
discussed from the various standpoints, which is mutually 
helpful. A lecture recently on finance caused considerable 
restlessness among the workmen present. The speaker was 
at a loss to account for this until afterward when he was 
approached by a number of the men and asked to assist them 



9 o AMERICA VS. EUROPE IN INDUSTRY 

in arranging for a course of instruction in finance at the 
local night school. They didn't know the meaning of such 
terms as "bond issue" and "reserves for depreciation" and 
they purposed to find out. 

The workmen suspect all that originates with the employer, 
their stock phrase being "Wot's the bloody gyme now?" 
whenever any new proposal — whether welfare or otherwise 
is made. Workmen's meetings have been largely in the hands 
of the noisy and socialistic elements. But the time for the 
real British workingman to assert himself is at hand and 
he can usually be depended upon for common sense and 
concerted action. 

A Government Official 

An official in the Ministry of Labour — a man long noted 
for his humanitarian viewpoint — said: 

I do not expect any great upheaval, although in times of 
stress it is hard to tell what may kindle trouble or where 
the conflagration may end. Trade associations have kept 
prices up — employers still want 25 per cent profit. Workmen 
have not been getting their share and - prices are still 
mounting. 

A peculiar result of this has been that a lot of little busi- 
nesses have sprung up like mushrooms — concerns where a 
father and a couple of sons perhaps have started a factory 
in their own home. They can work twenty hours a day if 
they want to. There is no government or trade union regu- 
lation. They haven't the overhead charges of the big business 
and people have taken to buying door latches and mouse 
traps at such places instead of at the ironmonger's. 

I have faith in the British workman, although there is 
some strong radicalism — the result of past exploitation and 
the cutting of piece rates. Limited production is as much 
the employer's fault as the workman's. 

Trade union leaders do not want a big strike now. They 
know just what it means and the misery it would entail. A 
good deal of the radical talk you hear and read in the news- 
papers must be regarded as the blowing off of steam. We 
encourage them to talk, over here, but handle them drastically 



EUROPEAN AND AMERICAN LABOR 



91 



if they begin to do anything. I think you are more inclined to 
lock them up as soon as they begin to talk. We would 
regard that as an interference with the rights of free speech 
in England. In fact, a lot of our people over here consider 
America is still in the feudal stage in its treatment of labor. 
We'd have a revolution right away if we tried to handle our 
labor disturbances the way you do. 

Another man — considered one of the brightest minds in 
England, who is working heart and soul for the working man 
and who has had wide industrial experience — epitomized the 
labor situation as follows : 

After the war, with munition plants shutting down, demob- 
ilization in full swing, and the whole industrial situation in 
a state of flux, there was rightful unrest. The government 
was alarmed and in February, 1919, appointed a commission 
to deal with labor difficulties. An industrial conference 
was called and held off the crisis for six months, by the 
end of which things had settled down sufficiently so that 
the government was no longer frightened. It therefore 
refused to carry out the recommendations of the commission. 
Labor's reply was the railway strike of September, 1919. 
Both sides were so well organized that they both got cold 
feet and compromised. The experience of the past few years 
has made the worker less willing to strike. He has been 
better paid and fed and unemployment has practically 
ceased to exist. The unemployment attendant upon present 
conditions may make people savage. 

Ca' canny is undoubtedly going on. The average man does 
not see why he should work. There was a big campaign for 
increased production in 1919. Prices went up when the 
people had been promised they would go down. This looks 
as if it proved the workman's theory of limited production. 
Even if prices do drop there is the question as to how much 
the markets which the rate of exchange and our relations 
with the East will allow us to reach will absorb. In the 
present uncertainty the manufacturers prefer to hang on to 
their existing policy. Meantime it is America's opportunity. 

The people are not revolutionary but fed up — with nearly 
everything. It is impossible to say what they will do eventu- 



92 AMERICA VS. EUROPE IN INDUSTRY 

ally. Probably for the present they will drift on. I am sure 
that no definite revolutionary aims exist in the minds of the 
majority of British citizens. 

A Labor Leader 

A journey into labor strongholds brought out a slightly 
different viewpoint which the two following interviews will 
illustrate : 

I do not expect a revolution. I believe the trend is toward 
participation in management — probably through government 
ownership. For instance there would be a Minister of 
Mines in charge of the industry — perhaps a man of the type 
of Lord Rhondda, who has had practical experience in mine 
management. The safeguard against the usual inefficiency 
claimed for government ownership would lie in the responsi- 
bility of this minister for the conduct of his industry. He 
would have to so run his department that he could defend 
his policies and prevent his party being turned out of office. 

Socialistic experiments of the past have consisted of 
isolated communities, so that these have proved no criterion. 
The British workingman has been somewhat horrified at 
the driving of workmen into Russian factories, of course, 
and it tends to make others pause. However, conditions of 
education differ here. The Labour Party is now in a position 
to back its own policies — we are twenty-five years ahead of 
the United States in that respect. Our idea would be that 
each government-owned industry would be self-contained 
and settle its own wages and prices. The more undesirable 
industries might have trouble getting workmen, of course. 
Some of our more imaginative thinkers foresee all men 
being required to spend a year or two at the more undesirable 
jobs — like coal mining. The unpleasant work must be done 
and it would be only fair to distribute it. 

In the case of the middle-class unions it is the idea to 
keep them distinct from labor unions but to have them all pull 
together where their interests are the same. The same rule 
would apply to foremen's and managers' unions. Of course 
these classes are numerically less and would be outvoted, but 
on account of their training they should have more influence. 



EUROPEAN AND AMERICAN LABOR 93 

Russia has had to resort to the old capitalistic scheme of 
paying executives and technical experts big wages in order 
to secure them. Labor doesn't want to find itself in the 
Italian position where the workmen after they had seized 
the factories couldn't run them for lack of experts. 

Under government ownership the consumer would be pro- 
tected by representation on the supreme council which would 
perhaps consist of 25 per cent technical members, 25 per 
cent consumers' members, and 50 per cent hand workers. 
Each industry would look out for its own unemployed instead 
of making them a burden on the community. Pay would go 
on in dull times — as the dockers, who want four pounds a 
week whether they work or not, have proposed. Production 
limitation is the fault of capital quite as much as of labor. 
The labouring party has no revolutionary program. We plan, 
rather, a gradual assumption of management as the workers 
are prepared for it. Many want to go too fast — that has 
been the trouble in Russia. General education is needed. 

A Leader of the Coal Strike 

Another leader whom I interviewed after the coal strike 
had begun dealt with the subject rather more concretely : 

The railway strike would have been won in another three 
days, when the busmen were going out, if the strikers could 
have been induced to hang on. The coal strike is a very dif- 
ferent matter. You can get Piccadilly Johnnies to drive lorries 
and handle milk cans for a few days, but they won't go down 
into the mines and dig coal. Mining is a key industry and 
the strike will show who is the most important factor in 
the community. 

I do not expect a violent revolution. They tried to go too 
fast in Russia — but the industrial revolution is now on. 
You must not judge the success of the Soviet system by 
Russia, as it was a tryout in time of war and in a country 
used to cruelty. Bolshevist atrocities are no worse than 
the atrocities under the Czar, and those in power are only 
getting a bit of their own back. The position of the British 
Labour Party was "No war against Russia. Hands off and 
give them a fair show to fight it out among themselves," and 



94 AMERICA VS. EUROPE IN INDUSTRY 

public sentiment was behind us. There had been too much 
supplying of munitions before. The Soviet system of rep- 
resentation by classes has not been discredited [and here 
he laughed] except — perhaps, in the case of the House of 
Lords. 

We believe that with the technical men — chemists, 
draughtsmen, and foremen — on the side of labor, industry 
can be made self-sustaining. There is no occasion for the 
man who lives on wealth he doesn't create. We believe in 
government ownership and in managers urged to work by 
the idea of public service. Managers don't get the money 
anyway. 

Education is of course necessary. How drastic treat- 
ment will be required to accomplish our ends depends upon 
the course taken by the government and the owners of 
industry. The present British government is not representa- 
tive of the worker, because the labor minorities in different 
parliamentary districts have no representation. The Soviet 
system would improve this condition. 

Limited production keeps the men employed. Every time 
a man increases his output he does some other man out of a 
job. You won't get production out of the men until all the 
profits are theirs. 

In contrast to this, another man, a sympathizer with labor 
but characterized by an employer member of Secretary 
Wilson's Labor Commission as one of the best informed men 
on labor matters in Europe, greeted me with : 

I believe you have found the solution of the labor prob- 
lem in America. Recently I spent some months visiting your 
big manufactories and I found you maintain the personal 
touch between employer and employee much better than we 
do and I believe that is the solution. If you will go up to a 
certain large plant I have in mind and will have lunch in the 
factory with the owner as I did and will listen to the tone 
of voice in which his men call him "Bill" I believe you will 
learn more about the proper handling of the labor problem 
than you will in traveling all over Europe. 

Another thing — a lot of people think organization is the 
thing best calculated to protect the workingman. So they or- 



EUROPEAN AND AMERICAN LABOR 95 

ganize him. And then the employers organize, and first thing 
you know you've got two great big machines, equipped to the 
limit for offense and defense — and then you've got to do 
something with them to justify their existence, just as they 
thought they had to justify the existence of European armies 
in 1914 by setting them in motion — and before you get 
through you've smashed up both sides and everybody con- 
cerned is dead or bankrupt. 

No, overorganization is a bad thing and doesn't do anybody 
any good. When these great big coalition unions are born, 
the leaders get so far away from the rank and file — and 
the common man's problems — that it is like a general look- 
ing at his army through the wrong end of an opera glass. 
They think only about winning and the workingman isn't as 
well off as when he lives next to a real human being like 
the man I mentioned and hasn't any organization machinery 
to protect him at all. 

There has been so much proselyting here in England and 
in the past — so much winning the workman to labor's side 
and away from the employer's side — that the men hate the 
owners. They suspect every advance they make, so that it 
is almost impossible to secure understanding and co-opera- 
tion. America is much in advance of England in that 
respect. 

An Industrial Leader 

And, finally, the summing up of the situation by a very- 
great man, indeed — perhaps one of the six greatest industrial 
captains of Europe: 

The labor situation in England is like a septic wound. 
We have been trying to close it up prematurely — while the 
poison was still in the wound. A thorough cleansing is nec- 
essary. We must have our labor fight out. How it will end 
I don't know. I am not a prophet but I believe we will come 
through all right. 

Points Brought Out 

To my mind the outstanding facts in these analyses of the 
British situation are : 



96 AMERICA VS. EUROPE IN INDUSTRY 

i. Agreement upon the part of the majority that increased 
production is necessary if England is to survive. 

2. The belief on the part of labor in restricted production. 

3. Refusal of the intelligentia type of labor leaders to 

regard the Russian breakdown as proof that the 
Soviet idea is a failure. 

4. Recognition of the lesson of Russia and Italy. 

5. Recognition of the necessity of securing the co-opera- 

tion of managers and technical men if labor is to 
win. Formation of middle-class unions. 

6. Agreement of all that a drastic overturn is unlikely. 

7. Trend toward participation in management for the 

employee. 

8. General recognition of the necessity for increased edu- 

cation for the working man. 

9. Faith on the part of employers in the common sense 

of the British working man. 

10. Recognition of the necessity for personal contact 

between the employer and the employee. 

11. Recognition — in a single instance — of the dangers 

of overorganization of employer and employee. 

12. General belief that, as organized, labor and capital 

must fight it out to a finish on the basis of right, 
with the public as umpire. 

Some Conclusions 

To these statements certain conclusions reached through 
personal observation in England should be added : 

1. In the most ably managed plants — in those in which 
scientific management existed or in which exceptionally able 
managers were in charge — the shop spirit was excellent. The 
employees were obviously happy and contented, their relations 
with the plant executives were friendly and strikes unknown 
except where a whole industry was called out by the union 



EUROPEAN AND AMERICAN LABOR 97 

leaders, where there was interunion strife, or where newly 
organized clerical unions were learning the art of existence. 

2. In the metal industry — the home of ultraconservatism 
— the shop spirit is the worst I encountered in Europe. The 
looks the men cast the executives — from directors down to 
foremen and technical men — were positively murderous. Ca' 
canny was obviously rife. In one plant the molders had 
thrown six subsequent departments out of work by slacking 
off preparatory to making the suggestion to an inquiring man- 
agement that "a raise might help some," which I was told 
was the usual procedure in such cases. 

3. Most of the modernly managed plants have some sort 
of system by means of which the employees may bring their 
difficulties before the management. These vary all the way 
from the full Whitley plan to monthly committee meetings 
with department heads. Participation in management, even 
in the most progressive plants, is limited strictly to suggestion. 
It is clearly understood by all concerned that the power of 
veto is entirely in the hands of the directors. All such shop 
government plans are under union control — committeemen 
always being union members — often union officials. Wage 
disputes are handled by the unions — not by the committee 
system. 

4. Educational provisions, welfare work, and housing 
arrangements in a number of instances are in advance of those 
in America. England enacted her factory legislation about 
thirty years before we did, but she will need to exceed us in 
her care for both the mental and physical welfare of her 
people for at least that length of time to come if she would 
have as little contrast between employer and employee as 
exists in the United States. 

The conclusion as to the next step in England is not an 
easy one — for neither am I a prophet — but I believe after some 
weeks of contact with men of all classes in most parts of 



9 8 AMERICA VS. EUROPE IN INDUSTRY 

industrial England that the country will eventually come 
through its struggle safely. There is no question but that 
sooner or later the issue must be fought out to the bitter end. 
There has been too much class against class and too much 
compromise, with expediency as the ideal instead of righteous- 
ness. But the British character is solid at bottom, its con- 
clusions are sane if slow, and once it has made up its mind 
what is right it will sweep aside the councils of the extreme 
radical and the extreme reactionary and work out a reason- 
able and fair course which will make England a better place 
to live in for that solid citizenry — the respectable middle class 
— which has made England what she is. 

Features of the European Labor Situation 

The outstanding features of the whole European labor 
situation may be summarized as follows : 

1. The definite check to wild and impossible altruistic 

theories administered by the failure of the Russian 
experiment, which is now generally admitted abroad. 

For instance, take the statements at the Second Interna- 
tional in October, 1920, by men who had been considered 
leaders of almost revolutionary labor : 

J. H. Thomas — who led the great railway strike in Eng- 
land in 1920, which at the time was expected by some to lead 
to revolution — said : "The issue between us and the Bol- 
shevists is clear. We must arm against them." 

Scheidemann, the famous German socialist, said: "This 
congress cannot adjourn without first condemning the propa- 
ganda of the proletariat dictatorship which the Russians are 
spreading throughout the world. We must fight the new 
autocracy of the man who cries The Proletariat, it is I.' " 

2. The effect of the Italian socialistic experiment which 

demonstrated at close range the economic necessity 



EUROPEAN AND AMERICAN LABOR 99 

for the existence of management, capital, and tech- 
nical knowledge. 

3. The recognition of the right of all elements of in- 

dustry to have a voice in its administration. 

4. Recognition by labor that intelligent participation in 

management implies education and responsibility 
for effective operation. 

5. The general, if unconscious, trend every wher£_ towa rd 

the German Organized Economic System of national 
trust in which all industry is organized both verti- 
cally and horizontally for the good of the workers, 
from apprentices to directors, with due recognition 
for the rights of all and with due emphasis upon 
the responsibility of all for the success of the in- 
dustry, for the success of the nation — and perhaps 
eventually for the success of the world — which 
became an industrial world at the inception of the 
steam age, a hundred years ago. 



CHAPTER V 

FACTORY BUILDINGS 

Elements of Building Efficiency 

The efficiency of a factory building depends upon the cost 
per unit of production which it imposes upon each unit of 
output. This is determined by: 

1. The factory's fitness for the effective production of 

the goods to be manufactured. 

2. The overhead charge which the building imposes upon 

each unit of production. 

Effective Production 

Under the first heading come the following considerations : 

i. Is the building so constructed that each pound of 
material and each pound of semiprocessed and finished product 
will — in the course of manufacture — 

(a) Be moved the least possible number of feet horizon- 
tally and vertically? 

(b) Be picked up and set down the least possible number 
of times? 

(c) Be moved by machinery with a minimum expenditure 
of cheap power — wherever the volume moved is sufficient to 
warrant the investment in carriers, elevators, and conveyors? 

(d) Be moved by gravity wherever possible? 

2. Is the building so constructed that all workers can pro- 
duce at the highest speed, compatible with continued well- 
being, with a minimum of fatigue? This demands — 

(a) Efficient Lighting, This implies: 

ioo 



FACTORY BUILDINGS IOI 

(i) Building so constructed as to permit the use of natural 
light for the greatest possible portion of the day. 

(2) Artificial lighting so arranged that daylight condi- 
tions are as nearly as possible reproduced. 

(3) Arrangement of both natural and artificial lighting 
so that the maximum production speed may be maintained 
with the least amount of fatigue. (Scientific experiment has 
shown that, within certain reasonable limits, the smaller an 
object the greater is the amount of light needed to see it clearly, 
and the greater the amount of light present the quicker can 
an object of any size be comprehended. If poor lighting causes 
a workman to hunt twice as long for small objects he is using 
or to slow down his machine every time he is doing work of 
a minute nature, and if it takes him longer to grasp the appear- 
ance of material or appliances and to handle them with safety, 
the definite slowing down in his production per hour and in 
the productivity of his machine is an expensive matter when 
multiplied by the number of men and machines at work and 
the number of working days in a year. Simple instruments 
have been devised to measure exactly the amount of light in 
every portion of a room.) 

(b) Efficient Heat and Ventilation. Buildings should be 
so arranged that the temperature, humidity, and ventilation 
shall be such as to enable the worker to forget them and to 
produce with a minimum degree of fatigue. 

(c) Efficient Flooring. Men standing on uneven, cold, 
stone floors are more likely to think about their feet than about 
their work and to be less useful workmen each day they 
undergo such unnecessary fatigue. Floors should be warm 
enough, dry enough, and resilient enough to cause the worker 
no discomfort, and smooth enough so that he can proceed 
at full speed without giving thought to where he is putting 
his feet. 



102 AMERICA VS. EUROPE IN INDUSTRY 

(d) Efficient Seating. In designing factory buildings 
attention should be given to arrangement which will permit 
some sort of a seat 1 for the use of every workman for at 
least a part of his time. 

(e) Efficient Sanitation. This covers the provision of all 
facilities which keep the worker continuously in a contented 
and healthful state of mind and body. It includes luncheon- 
rooms, lavatories, rest and recreation rooms, first-aid rooms, 
swimming pools and gymnasiums, safety museums, educational 
facilities, co-operative stores, and the like. 

Overhead Charges 

The overhead charges which a building imposes upon each 
unit of production depend upon : 

1. The value of the land upon which the building is 

constructed. 

2. The cost of the building itself. 

3. The expense of maintenance — including light, heat, 

and janitor service. 

4. The length of time the building can be used if kept 

in proper repair. 

The value of the land opens not only the question of cost 
per acre but the whole question of strategic location for the 
industry. If it were a simple matter of acreage cost the 
industrial center of America would be in the Arctic or in the 
middle of our swamps and deserts. But markets— and this 
takes into consideration facility of transportation, population, 
climate, and many other things — must be considered. The 
labor supply must be sufficient. The source of raw materials 
and the supply of power and water must not be neglected. 
The cost of acreage which takes these factors into considera- 
tion — whatever its price — is eventually likely to be less than 



1 See publications of Gilbreth on the subject in "Transactions of Society of Indus- 
trial Engineers" and elsewhere. 



FACTORY BUILDINGS 



103 



where any of them are ignored. It is sometimes possible, 
however — where strategic location demands placement in the 
high-rent district — to modify the shape of the building and 
so economize in land without materially detracting from the 
standards described under 1. The extreme example of this 
is, of course, lower Manhattan Island where they almost — as 
an Englishman said — "have to lower the skyscrapers to let 
the moon go by." 

The actual first cost of the building itself is not by any 
manner of means so important as its cost per year. The cost 
per year is made up of the interest on the investment, the cost 
of repairs sufficient to maintain the building in usable and 
safe condition and to prevent unduly rapid deterioration from 
water, frost, acid fumes, and other similar agents, and the 
replacement depreciation charges. The famous railroad tie 
case perhaps best illustrates that first cost is by no means last 
cost. 2 





Cost per Year per Thousand 


Type of Tie 


First 
Cost 
per M 


Interest 


Depre- 
ciation 


Total 


Fir Tie — Life, one year 


$1,000 

4,000 

20,000 


$60 

240 

1,200 


$1,000 
250 


$1,060 

490 

1,200 


Special Non-Destructible Tie .... 



From this it is evident that the oak tie is the cheapest per 
year to use and that there may be, as in the case of the "non- 
destructible tie," such a thing as building too durably. It is 
evident, however, that it is very unsafe either to construct or 
to buy a factory building without preparing just such figures, 
because ultimately you must charge every dollar expended for 
interest and depreciation either against your cost of production 



2 Figures are fictitious. 



104 



AMERICA VS. EUROPE IN INDUSTRY 



or else take it out of your profits. The increased cost of 
production due to loss of operating efficiency on account of 
unsuitable and unsanitary buildings just as surely comes out 
of the profits and even more careful analysis of the situation 
is necessary before building, if unnecessary loss is to be 
avoided. 

Europe Before the War — Efficiency vs. Durability 

In Europe in 19 14 the custom seemed to be to sacrifice 
efficiency to durability. This was not so much due to the 
careful selection of a policy as to the old country custom of 
building for permanence and then, after a building had been 
written off the books entirely but still remained serviceable, 
disliking to spend the money located theoretically in the depre- 
ciation reserves — but actually doing good work elsewhere — 
for a building without which it was possible to brush along. 
As a result plants built around in a circle — with no room for 
expansion and overcrowded with workers, ancient buildings 
with floors hitched together with inclined passages or even 
by steps — dark and evil-smelling rooms and inadequate heat 
and ventilation were common. 

The same rule seemed to apply also in the case of equip- 
ment. One concern I visited in 1914 was shut down be- 
cause of a breakdown in their power plant. "The engine 
is over fifty years old and it is rather hard to secure repair 
parts for it," was the explanation which the superintendent 
offered. 

Then came the war. Organizations housed in old 
rookeries were needed to operate vast new munition and war 
material plants. The new plant sprung up beside the old, 
often while the old one was still in operation. The old plant 
was torn down or used for storing odds and ends of material 
while the new plant stood as an example of the best practice 
of the organized brains of the world. 



FACTORY BUILDINGS io5 

English Factory Architecture — A Sheffield Plant 

A great steel plant in Sheffield is an example of this. On 
one side of the street is a row of tumble-down brick buildings 
— of different heights and styles of construction — alike only 
in small windows, frequent posts and partitions, and general 
lack of sanitation. Until the war they constituted the prin- 
cipal source of a line of products known throughout the civil- 
ized world. But the superintendent of that plant was a man 
of imagination. He dreamed dreams. During the day he 
ran the plant, but far into the night — with the help of a 
draftsman — he committed his dreams to paper. His Sundays 
he spent on the moors — staking out his dreams with chalk 
line and peg until he had envisaged every detail of a great 
steel plant — a steel plant the like of which had never before 
been created. 

When England entered the war he threw himself heart 
and soul into the production of munitions. His best men 
went into the army, but he wrought so well with what 
remained, with women and even with children, that he was 
called to a government control board. Later he was made 
head of a board controlling a key industry. He gained in 
strength and in initiative. The armies called for more muni- 
tions — more factories were necessary. The directors of his 
company listened to his plans. They bought a piece of land 
across the street from the old plant. On it he staked out the 
factory he had built on the moors with chalk line and peg. 
He staked out every furnace, every track, and every sand bin 
so that the oldest foreman could see just what he planned. 
He altered to meet their objections and to embody their crea- 
tive suggestions. When everyone was convinced the builders 
were called in. 

Last October this man — now a director of the company — ■ 
showed me the completed plant. It is a great structure of 
steel and brick and concrete — with uniform and well-lighted 



106 AMERICA VS. EUROPE IN INDUSTRY 

buildings radiating from a common center like the spokes 
of a wheel. There are eight different routes which the various 
products may take through these buildings — depending upon 
the nature of the particular product — but so carefully was 
every detail worked out beforehand that regardless of whether 
from department A it goes next to department B, or to C, or to 
D — or even from D to B again — the distance it is transported 
remains the minimum and it never has to be transported twice 
over the same ground. 

Layout of the Foundry 

The foundry, instead of being laid out in the usual way — 
consisting of a central, or crane- way bay, with one or two 
parallel side-bays, where the bulk of the molding is done — 
is composed of one crane- way bay with eight bays set at right 
angles to it. The four furnaces, two of which are operated 
each day, are located at the edge of the crane-way bay. This 
is equipped with heavy overhead cranes, a» locomotive crane, 
with railroad tracks for sand, etc., and with light truck tracks, 
and is so paved that carts and barrows may roll easily. This 
concentrates the bulk of the transportation — of which it will 
be observed there are six kinds — in the crane-way bay and 
makes it impossible to lack the particular type of transporta- 
tion most effective for a particular purpose. Ladles and heavy 
castings are, of course, handled by the principal cranes in the 
crane- way bay, just as under the usual parallel arrangement 
of bays — but they are handled much more quickly, the weight 
being transferred almost at once by means of a double-eye 
hook to the cranes in one of the eight bays at right angles 
to the central bay. Consequently the chance of one of the 
principal cranes tying up another is almost nil, as compared 
with the usual arrangement where the principal cranes hold 
the weight during the performance of the complete operation 
in the central bay, or where the cranes in the single parallel 



FACTORY BUILDINGS 107 

bay must handle all heavy work not done in the central bay. 
In other words, in the foundry described there are eight 
chances to relieve a crane of its burden at once, as against 
the usual one chance. Moreover, each crane's increased 
"reservoirs of work" 3 allow its very much more complete 
utilization with corresponding increase in transportation costs. 
These two examples are typical of the construction of the 
whole plant. It embodies the best of the past with original 
and courageous enterprise — not the enterprise of the erratic 
dreamer but of the dreamer with his feet planted solidly on 
the ground, tempered by experience, knowing the value of 
the experience and co-operation of others, even to that of 
the most inconsequential straw boss, and knowing how to enlist 
that experience and co-operation to a great end. Coupled 
with these qualities were the necessity and the initiative born 
of the war. The result is not only a wonderful plant but 
a manager with an international outlook — with a viewpoint 
which could have been developed in no other way — who will 
leaven not only an industry but an industrial nation with 
dreams realized in hard stone, mortar, and steel — which not 
even the most skeptical may doubt. The case is typical of 
industrial Europe. The price of the metamorphosis was 
ruinous but from the wreckage of five years has been born 
an industrial progress which under normal development would 
have required half a century. 

High Overhead and Efficiency 

Another British plant, which was built several years before 
the war, embodied certain American ideas — especially that of 
progressive assembly with the paths of assembly lined with 
bins containing the assembly parts required at each stage of 



s "Reservoirs of work" are required in order to permit any unit of industry to 
exert itself to the utmost. If a man who desires to chop wood lacks a source from 
which to secure the wood or a place in which he can lay each stick down, once he has 
chopped it, he necessarily cannot chop wood to the full limit of his physical power. This 
principle will be discussed more fully in a subsequent chapter. 



108 AMERICA VS. EUROPE IN INDUSTRY 

progress. The plant was a modern concrete structure, well 
lighted and equipped with conveyors and with elevators which 
nearly removed the hair from the heads of Europeans not 
used to American express elevators. It was immensely ex- 
pensive to construct, however, and the directors shuddered 
whenever they compared its cost of production (including 
depreciation) with the cost in their other plants whose con- 
struction cost had long since been written off the books. 
During the war, however, conditions changed. Wages rose 
by leaps and bounds and efficient operation rather than low 
overhead became the controlling cost factor. Today this 
modern factory is the greatest money-maker in an immense 
consolidation and superintendents from the company's other 
plants are being sent there to learn the methods which make 
it possible to manufacture more cheaply in this building than 
in any other factory. Again first cost is not last cost. 

Single-Story Building 

Of late England has run quite extensively to one-story 
buildings as is natural in a country where dark days predom- 
inate. Saw-tooth roofs enable them to take advantage of the 
increased value of skylight as against side-light. The choco- 
late manufacturers run to small units of such buildings con- 
nected by covered passages, which makes for pleasant working 
conditions and effective operation, provided proper transporta- 
tion can be arranged. Unfortunately in some of the plants 
I visited not enough attention had been given to this last 
feature with the result that long truck hauls and expensive 
congestion were painfully evident. There is no money in 
paying the wages of six truckmen who stand at a narrow 
passage and wait while two trucks are untangled and their 
loads straightened so that they can proceed. 

Some of the soap manufacturers have attempted to get 
away from this difficulty by the use of single-story units 



FACTORY BUILDINGS 



109 



covering immense areas. Trucking congestion is much less 
likely under these circumstances and supervision of large num- 
bers of workers is made possible by the use of a gallery. 
There is a ventilation difficulty, however, similar to that which 
was encountered when the first attempts were made to get 
away from the old type of monitor-roofed foundry, where on 
account of the great open spaces, air currents were so difficult 
to control that part of the workmen had almost to freeze to 
death to keep the rest from smothering. This is a difficulty 
which will undoubtedly be worked out in the factories, just 
as it was in the case of the foundry, when a scientific study 
of the air currents was made. 

American vs. European Buildings 

In some cases American firms have put up the type of 
building in England which they have developed in America. 
Wholesale transference of this sort is a mistake unless climatic 
and temperamental differences are taken into consideration. 
A wide six-story building covered with glass may be just the 
thing for America but an interior in England needs more 
light and one in Italy much less light if the worker is to 
operate at a maximum of efficiency. Stone pavements may 
work very well where coolness is a virtue and the workers 
each provide their own carpeted floor by wearing wooden 
clogs and thick stockings, as they do in Italy, but are wholly 
out of place in a damp climate where ordinary footwear is 
worn. Furthermore, Europe isn't case-hardened to architec- 
tural ugliness as we are in America and a factory which is 
entirely suitable in Detroit would cause a riot in Florence. 
Even Italian peasants shudder at our buildings when they 
first arrive here and the imposition upon a peaceful and 
beauty-loving community abroad of such horrors as we have 
at times indulged in would hardly be conducive to that popu- 
larity which of late our large corporations have felt to be well 



no AMERICA VS. EUROPE IN INDUSTRY 

worth cultivating in the communities in which they must exist. 
The administration building of a certain large steel plant 
located in the blackest part of the Black Country is typical 
of certain phases of English progress. The building is built 
of brick and is well lighted from all sides. The air is pumped 
in from a stack 150 feet high — in order to have it as free 
from soot as possible — and is then washed. As a result papers 
are clean where previously they became almost illegible in a 
few days. The walls are paneled with Irish, Greek, and 
Italian marble which allows them to be sponged clean. In 
the directors' room there is a fireplace — a concession to con- 
servatism and to that particular form of "cosiness" which 
can be produced in an atmosphere of murk and rain only by 
an open fire and a glass of Scotch. Altogether it is comfort- 
able, efficient, and typically British. 

French Factory Architecture 

Early in the war a young French aviator, returning from 
a reconnaissance in Alsace was attacked by six German aero- 
planes. He fell shot through the spine. As a monument to 
this young man's heroism a great foundry has been erected 
in Burgundy — L'Usine Henri-Paul — named in honor of the 
eldest son of one of the greatest steel-makers in the world. 
The main building is 800 feet long and 500 feet wide. It is 
built of concrete with red brick panels — a most attractive 
combination. The skylights are of wire glass and the windows 
which fill the greater part of the outside walls are of the most 
modern construction. The cupolas are of the latest design 
and the flask pits are 30 feet deep. 

The Power Station of Le Creusot 

This is only one of the modern buildings which have 
sprung up in the vicinity of Le Creusot during the war. There 
are over 50,000 people in the city, more than half of whom 



FACTORY BUILDINGS III 

work at the plant. This consists of two groups. One com- 
prises the power station in which 25,000 horse-power 4 is gen- 
erated. (Six thousand additional comes in from a hydro- 
electric plant in the mountains and 50,000 more will she/Sly 
be available from a power station in the Alps near Grenoble. 
Incidentally the company owns and mines a large part of its 
own coal.) A typical unit of the power plant is equipped 
with three 12,000 horse-power gas engines operated with gases 
from the blast furnaces, ten steam turbines, twelve Babcock 
and Wilcox water-tube boilers equipped with chain grate 
stokers, a green fuel economizer and concrete coal bunkers, 
and a mechanical handling plant for coal and ashes. 

In this same group, made up of the older buildings, are 
the coke ovens and the steel works where there are six open- 
hearth furnaces capable of turning out 4 tons per hour each 
on tool steel. The medium forgeshop contains a 12,000-ton 
Whitworth Manchester press but otherwise is conventional. 
At the time of my visit it was being operated on locomotive 
tires and car wheels with a part converted into a plant for the 
reclamation of locomotive boilers. The heavy forgeshop, 
which is also a part of this group, produces annually 20,000 
tons. The hammer and press department contains a 120-ton 
steel hammer built in 1876. It is here that the big guns are 
made, as a gun which throws a 26-inch shell or one which 
will shoot 80 miles naturally requires special equipment, such 
as vertical furnaces, pits for quenching in oil, and the like. 
In the rolling-mills, which have an annual production of 
250,000 tons, 60-ton ingots for armor plate are handled. The 
plant is equipped with an 85-ton crane and an electric rolling- 
mill is in process of construction. For the most part the 
buildings in this group are of the old type — brick walls and 
metal roofs — although here and there is one which possesses 



4 Altogether over 200,000 horse-power is generated at the various Schneider estab- 
lishments in France. 



112 AMERICA VS. EUROPE IN INDUSTRY 

all the latest lighting and ventilation equipment. The railroad 
yards are very extensive and cars can be set at any point 
^lesired. 

The Steam-Turbine Shop 

The second group of plants consists of the steam-turbine 
shop, which turns out 300,000 kilowatts of turbines annually. 
This is a building which would be a credit to any country, 
made of steel and concrete, with enormous windows and sky- 
lights and equipped with cranes, hyrdaulic testing pits for 6,000 
kilowatt turbines, and with individual drives for each machine. 
The locomotive shop, which comes next, is of similar con- 
struction except that the semicircular roof, which is being 
used extensively now in Europe, is in evidence. This plant 
turns out 350 locomotives a year — something over 25,000 tons 
— many of which are at present of the Pacific and Mogul type. 
Next to this are the auxiliary service buildings — a series of 
one-story saw-tooth roofed brick and concrete buildings where 
woodworking, repairs, and like work is carried out. This 
group contains also the fireproof pattern storage. 

The steel foundry — with a capacity of 2,000 tons — comes 
next and is an exceedingly attractive building. Just beyond 
is perhaps the most modern group of buildings at Le Creusot 
— the Ateliers de Mecanique Generale, or general machine- 
shop. The main building — in spite of the fact that it is 700 
feet square — is one of the best lighted buildings I have ever 
visited. It is equipped with cranes up to 120 tons and with 
Pond and Cincinnati machine tools. It contains a vault for 
precision instruments, tool-grinding and storage departments 
designed to make full use of the most complete scientific man- 
agement practice, and is heated by steam. Its lavatories are 
the equal of those which exist even where sanitation and 
civilization are held to be synonymous. The new rolling-mills 
are next, after which come the new steel works. These con- 



FACTORY BUILDINGS 113 

tain eight Martin furnaces and produce 300,000 tons of ingots 
a year. The building is about 700 feet long and the day I 
was there an electric magnet was crowding scraps of destroyed 
bridges, German bayonets, and barbed wire posts into trays 
which were later thrust into the steel furnaces and mechanically 
dumped. 

These new buildings at Le Creusot are quite the equal of 
anything in the world, not only from a utilitarian but from 
an artistic standpoint. There may be a few feet of surplus 
height, but that is something which it is better to have and 
not want than to need and have to do without. Altogether 
they will rank very well from the standpoint of each of the 
six counts enumerated as standards at the beginning of this 
chapter, i.e. : 

1. Cost of handling material. 

2. Effectiveness afforded the worker. 

3. Land investment. 

4. Construction costs. 

5. Maintenance expense. 

6. Life of building. 

A Berliet Plant 

The Venissaux plant of the Berliet Automobile Company 
employs only about 6,000 men, but it is one of the most 
modern plants in the world. It is located on a fiat piece of 
ground some miles out of Lyons and is partly surrounded by 
an artistic concrete fence. The buildings are of reinforced 
concrete and, while not as completely equipped with windows 
as some of the more northern plants, are entirely suitable to 
the climate of southern France. The process begins with the 
blast furnaces, then proceeds over the molding floors to the 
forgeshop and eventually into the works proper. Outside 
materials are unloaded at car level directly into storerooms 
which are a marvel of neatness. Mass production with all 



114 AMERICA VS. EUROPE IN INDUSTRY 

its attendant progressive machining, standardized gauging, 
chain assembly, and all that made Detroit famous, has been 
imported from America, together with the necessary Foote and 
Burt and other types of American machines and the buildings 
are designed for this type of manufacture. The roomy and 
attractive employment office is located at the main entrance 
and two concrete canteens, each of which seats 2,000 men, 
are attractively placed across the parkway from the fac- 
tory. The offices are of the most modern type — a single 
great room for the clerks and glass cages for the higher execu- 
tives, with everywhere plenty of room provided for future 
expansion. Some plans still remain to be carried out, but on 
the whole the buildings rank very high from the standpoint 
both of beauty and industrial utility. 

Blast furnaces seem to be the rule in French motor plants. 
Even some of those located in the city of Paris are equipped 
therewith and make most of their own castings. American 
water-tube boilers and steam turbines are the rule in the more 
modern French power plants. But no matter how efficient 
or utilitarian the plant, nor how disagreeable the process, there 
is always the effort to secure an artistic effect in the buildings 
and in the grounds about them. In France the love of beauty 
is so universal and the training in art is of such long standing 
that it is doubtful if even a glue factory could escape the 
aesthetic touch. 

Italian Factory Architecture 

Northern Italy's transformation from an agricultural and 
pleasure land to an industrial nation is recorded in her factory 
buildings. Formerly content to form a dumping ground for 
cheap German goods and to send her sons abroad to earn 
the means of subsistence at home, she was reborn during the 
war and is fighting franctically to retain the self-confidence 
and well-earned pride of achievement gained by standing on 



FACTORY BUILDINGS 



115 



her own feet industrially for five years. During the war she 
developed as fine factory buildings as any of her allies. 

The Ansaldo Plants 

The Ansaldo' s Victory factory represents all that is modern 
in machine-shop construction — spacious, well lighted, built of 
steel and concrete, and equipped with Cincinnati and Plainfield 
machine tools. The same company's aeroplane factory at 
Genoa is another of the same type. The concern which in 
1908 was made up of a locomotive plant, a shipyard, and three 
small foundries now consists of over thirty separate establish- 
ments — locomotive plants, ordinance works, iron, steel, brass, 
and aluminum foundries, shipyards in half a dozen places, 
gas works, electro-technical plants, chemical plants, five aero- 
plane yards, and motor- and machine-shops. 

Ships of over 30,000 tons are built complete at the An- 
saldo's Sestri yards, which are equipped with the most modern 
traveling cranes, with electric turret cranes, with machine tools, 
with plate-flattening machines, pneumatic tools, and modern 
devices of every description. The most elegant furniture for 
transatlantic liners is manufactured there, as well as steel and 
aluminum furniture for more utilitarian purposes. Oil motors 
and gas motors up to 400 horse-power are made at the Savola 
yard, which also serves as central storage yard for raw ma- 
terials. The company owns it own shipping basin — with an 
area of 120,000 square meters at Genoa. 

The Ansaldo's new steel plant, begun in 1910, is equipped 
with Martin furnaces, with 15,000-ton forges, and ingots 
weighing 150 tons are cast. Built of steel and concrete it is 
divided into twelve departments — furnaces, heavy hydraulic 
presses, small hydraulic presses, heavy rolling-mills, light 
rolling-mills, thermo-technical treatments and armor-plate 
hardening, armor-plate machining, gun machining, marine 
engine and locomotive machining, files, bolts, and springs, con- 



n6 



AMERICA VS. EUROPE IN INDUSTRY 



trol and inspection, and research. The projectile plant is seven 
stories high, 1,200 feet long, and 90 feet wide. 

New Fiat Motor-Car Plant 

The new Fiat motor-car plant in the Lingotto in Turin is 
built of concrete and steel. Before it was started a commis- 
sion of ten men spent two months studying American auto- 
mobile plants. The largest building is 504 meters long by 






Figure 6. Automobile Testing Tracks on Top of the Fiat Plant in 

Turin 

80 meters wide and five stories high. A speedway 1,300 
meters long for testing motor cars is in process of construction 
upon its roof (see Figure 6). The building erected in the 
shape of an H, is equipped with freight elevators of unusual 
size, is well lighted and massively built, and "offers even 
America an example of Italian grandeur in conception, and 
audacity in construction," as our guide aptly phrased it. 

Further description of Italian factory buildings would 
simply consist of repetition. Her new plants combine the 



FACTORY BUILDINGS 



117 



best in the way of utility and strength which modern industry 
has developed, with the beauty of design which has marked 
Italian architecture from the days of the Roman Empire. 
Her buildings are more massive, are higher, and there is less 
window area — all of which makes for beauty and incidently 
for coolness and comfort in a climate which is well adapted 
to such departures from our own practice. Italy's problem 
is now that of securing raw material and credit with which 
to keep these palaces of industry at full production. 

German Factory Architecture 

With true Teutonic thoroughness the Germans began 
probing into details of factory construction in a systematic 
manner while some of the rest of us were giving most of our 
attention to invention and the manufacturing processes. As 
a result the dates which appear on the modern type of factory 
building in Germany are more ancient by some years than 
those which appear on structures of similar merit else- 
where. 

The Ludwig Loewe Plant 

The Ludwig Loewe machine tool plant in Berlin is perhaps 
typical. The new factories were erected in 1898 — about the 
time we started to manufacture bicycles on a large scale — 
and cover 760,000 square feet of ground. Standard gauge 
tracks from the state railways permit loading and unloading 
by crane from railroad cars to the light cars which run on 
some sixteen miles of narrow-gauge track throughout the 
plant. The factory is equipped with more than eighty cranes 
— electric, pneumatic, etc. — and fifteen elevators, all connected 
with a narrow-gauge railway system in such a manner that all 
loading and unloading on all floors can be done mechanically. 
The buildings are all connected by subways from cellar to 
cellar and by bridges located at the second floor level. The 



n8 



AMERICA VS. EUROPE IN INDUSTRY 



yards have paved streets running between carefully tended 
lawns. 

The buildings, which are of brick and steel, are beautifully 
finished and of artistic design. The brick work is particu- 
larly attractive. There is a special building for each branch 
of manufacture and these are so grouped as to facilitate the 
progress of the product and avoid unnecessary transportation. 
The ground floor of the administration building is taken up 




Figure 7. Modern German Factory Architecture 

with a storeroom for finished machine tools, small tools, 
standard parts, repair parts, and office supplies, a lecture hall, 
employment department, surgical room, and a library for 
employees. On the second floor are the administrative offices, 
sales offices, engineering department, stenographic and filing 
departments, the pay office, and various reception rooms. On 
the third floor are the bookkeeping department, the commer- 
cial department, the publicity department, the patent office, 
and the drafting-room of the apprentices school. On the 
fourth floor are the separate dining-rooms for the engineers 
and administrative officers, for the clerks, and for the feminine 



FACTORY BUILDINGS 119 

office employees. The apprentice school is also located on 
this floor. The fifth floor is given to fireproof storerooms 
for drawings and documents. 

Throughout the factory buildings plenty of light is guaran- 
teed by large windows which cover three-quarters of the walls, 
by skylights, and by well-placed electric lights. Heat and 
ventilation are taken care of by the indirect system, air being 
forced in continuously by means of Sturtevant blowers — 
through steam coils in winter. The buildings throughout the 
plant are floored with American hard maple, which makes a 
floor that is comfortable, durable, and easily cleaned. Ceilings 
are so arranged that all hangers required for the various sorts 
of transmission can be clamped in place easily, I beams having 
been left exposed so that I-beam stringers — held in place by 
clamps — can be laid on top of their lower flanges. 

Proper Electrification 

The machines are all electrically driven in groups by motors 
ranging from 5 to 50 horse-power. This is a matter which 
very often is given too little study in America, where our 
tendency is to drive the whole room with one or two motors 
or else to operate each individual machine with a separate 
motor. There is, however, a point of maximum, efficiency 
which should be worked out in the case of each installation. 
The individual motor system means either overmotoring each 
machine in order to provide for the occasional overload, or 
else running the motor part of the time overloaded with con- 
sequent shortening of its life. A judicious grouping of a 
number of machines on one motor very often makes it possible 
to avoid extra expense for unnecessarily large motors and to 
provide for the overload without straining the motor, by 
taking advantage of the fact that an overload is unlikely to 
occur on all machines at once. Thus, if five machines, requir- 
ing normally 10 horse-power each to operate them, are each 



120 AMERICA VS. EUROPE IN INDUSTRY 

equipped with separate motors it might be necessary to use 
five 12 horse-power motors to take care of the more or less 
frequent overload, if shortening the life of the motors were 
to be avoided. If the five machines were hitched to one motor 
it would ordinarily be quite safe to use a 55 horse-power motor 
instead of 60 horse-power of small motors with consequent 
saving in first cost. Of course it is necessary to take into 
consideration the cost of extra shafting, the frequency, amount, 
and duration of overload, the percentage of possible machine- 
hours each machine is ordinarily operated, and the like, but 
the matter is one which deserves much more serious study 
in this country than it has so far received. I have known 
of several cases where the electrification of a plant was re- 
garded as a failure and the motors were torn out simply 
because breakdowns from overload were not sufficiently 
guarded against. There are undoubtedly innumerable cases 
where large sums have been expended needlessly for motor 
equipment simply because the engineers involved wanted to 
play safe and did not apply this principle — which is simply 
the one which has for years enabled our fire and life insurance 
companies to operate successfully. 

The Power Plant, Foundry, and Machine-Shops 

The Loewe power plant, which is equipped with steam 
turbines and vertical triple expansion engines, is capable of 
generating 2,250 kilowatts. Dynamos coupled direct with the 
engines supply the works with current of 500 volts for power 
and of no volts for lighting. 

The foundry is equipped with five cupolas, which are 
charged with electric lifts. Pneumatic stamps and electrically 
agitated sieves form part of the equipment. The heavy mold- 
ing department turns out engine cylinders and beds for tur- 
bines and machines tools. The light molding department is 
operated on motor-car cylinders and the like. The usual 



FACTORY BUILDINGS I2 i 

pickling and sand blast departments are present, together with 
pneumatic chisels, emery wheels, etc. The steel storage is 
provided with special types of cutting-off machines. The 
smithing department building is heated by a special forced 
air system and exhaust fans carry off smoke and dust. 

The machine-shops, whose buildings form an E shape with 
the main halls 368 x 102 feet and the wings 51 x 54 feet, are 
so arranged that each of the five main classes of machine 
tools built is manufactured in a separate department under a 
separate staff. The sixth class — special individual orders — is 
manufactured in a separate department. Machines are else- 
where grouped so that progressive machining is provided for. 
The erecting department, which is equipped with modern trav- 
eling cranes, has a roof completely covered with glass. All 
raw materials are thoroughly tested both physically and 
chemically, as are also all coal, coke, and oil before the cars 
are unloaded. Altogether the plant embodies the latest and 
best American practice in factory building to an extent which 
is rather disconcerting when we stop to consider that it has 
been erected nearly a quarter of a century. 

The Brunnenstrasse Factory of the A. E. G. 

While the Brunnenstrasse factory of the Allgemeinen 
Elektricitats-Gesellschaft was started in 1895, the most strik- 
ing buildings were erected in 1912 and 1913 after designs by 
Professor Peter Behrens. About 15,000 men are employed 
in the six factories — the large machine factory (see Figure 8), 
factory for railway material, factory for high-tension material 
(see Figure 9), locomotive factory, small motor factory, and 
resistance factory — which cover some hundred thousand 
square meters in the outskirts of Berlin. Mass production — 
what the Germans call "wholesale manufacture" — is the funda- 
mental principle ruling the methods of production throughout 
the plant. It has been worked out to the last detail so that 



122 



AMERICA VS. EUROPE IN INDUSTRY 




Figure 8. Exterior of the Large Machine Factory of the A. E. G. 

Plant in Berlin 




Figure 9. High-Tension Material Factory of the A. E. G. Plant in 

Berlin 



FACTORY BUILDINGS 123 

the result is immense quantities of high-grade articles at an 
exceedingly low cost of production. 

The entrance gate is imposing — twin towers of red brick 
supporting a Gothic arch with cloaked and gold-laced porter 
on guard before a stone-paved plaza flanked on one side by 
great factories and on the other by tall trees. The factories 
are of red brick — eight stories high, with clock towers and 
Roman pillars. The high-tension factory, covering some 
10,000 square yards of ground, has two little Greek temples 
cuddling between towers reminiscent of Kenilworth. The 
windows are of various dimensions, sometimes pleasingly 
staggered and again arranged in classic rows or grouped under 
the eaves of a mansard. "The principle adopted in all the 
new A. E. G. buildings — of equal social and aesthetic im- 
portance — is everywhere to provide well-lit, cheerful work- 
rooms which tend to increase the working power of the worki 
man and to add to his personal comfort." The ground floor 
of this building is occupied by two very large halls which are 
so lighted from the top and sides that upon entering them 
there appears to be even more light than outside. Above the 
halls and between the corner towers are the offices, located at 
this height for light, cleanliness, and air and to avoid cutting 
off light from the factory, as is so often the case when the 
officers are located on the street side of a large factory. 

The Small Motor and Large Machine Factories 

The small motor factory, which covers 7,500 square yards 
of ground, extends along Volta Strasse for over a block. 
Forty or fifty massive brick pillars — spaced wide for multi- 
tudinous windows set in metal and standing five stories high 
— support the glass roof. Inside the motors pass from ma- 
chine to machine on small cars until completed. Automatic 
machines, some of them requiring a very small part of an 
operator's attention, are the rule. The factory is well pro- 



124 



AMERICA VS. EUROPE IN INDUSTRY 



vided with reservoir storerooms between departments so that 
accumulations in the workrooms with consequent difficulty of 
operation are avoided. 

The large machine factory is one of the older buildings — 
built in 1896 of bridge steel. In the large hall — 22,000 square 
yards in area — the large electrical machines are manufactured. 
(See Figure 10.) The colossal castings of the huge gener- 







.<-- >' 




; 



• .■.■■-■ 

Mf^fjIP^ 

■I ?: 

■•',-; ■'■■■ ."■,''"■■ • 

■; - 

■ ■ ■ ■..■.■.. , .,■ 



a 





Figure 10. Erecting Floor of the Large Machine Factory of the 

A. E. G. in Berlin 

ators rise nearly to the roof. Spaces between jobs are kept 
clear, with only the parts which are next needed delivered 
for use. The largest generators and motors are manufactured 
in the center and the smaller ones at the sides. The building 
is well equipped with cranes, the largest of which have a 
capacity of 75 tons. The final assembly hall of this factory 
was built in 1912 and is the last word in factory building. 



FACTORY BUILDINGS 



125 



The exterior is of brick with steel windows arranged in double 
panels between pilasters. The hip roof is in four sections 
and is almost solid glass. The steel frame of the building, 
which can be seen from the interior (see Figure 10), is covered 
with tile and plaster painted white. The principal crane has 
a capacity of 85 tons and projecting from the side-walls are 
cantilever cranes of 3-ton capacity. 




Figure 11. Switch Engine Driven by Storage Battery and Electrically 
Operated Turntable in Yard of A. E. G. Plant in Berlin 

The power plant generates 10,000 kilowatts at 2,750 volts, 
which is transformed down to 190 volts after it reaches its 
destination in the various buildings. Coal is unloaded me- 
chanically and stored in underground storerooms until needed, 
when it is fed to the boilers by means of automatic stokers. 
All pipes, wires, etc., are located in underground tunnels of 
considerable size. 



126 



AMERICA VS. EUROPE IN INDUSTRY 



Transportation 

Standard-gauge railway tracks reach every department and 
the cars are shunted within the yard by means of electric 
locomotives driven by accumulators (see Figure n). Turn- 
tables are mechanically operated by means of a controller. 
Goods are dispatched from the factories, all switching being 
in the hands of the state railway board. Special warehouses 




Figure 12. Methods of Transportation in the Yard of the A. E. G. 

Plant in Berlin 

for manufactured stock are provided, equipped with traveling 
cranes. Box-cars are lowered upon special platforms until 
their floors are level with the floors of these warehouses, which 
permits the motors to be rolled in directly. Flat cars are 
loaded with the crane. The yard is well equipped with travel- 
ing cranes, some of them of 30-ton capacity, for unloading 
and storing raw materials. In addition there are electrically 
driven motor trucks equipped with small cranes, electric trucks 



FACTORY BUILDINGS 127 

and trailers, and electrically driven narrow-gauge cars for the 
transportation of materials about the plant. 

The plant is equipped completely with cafeterias, first-aid 
rooms, apprentice schools, restrooms, and even with a roof 
garden, all of which will be described later. Order, system, 
and organization are the keynotes of the Brunnenstrasse plant. 
You might spend a month there and still marvel at the thor- 
oughness and science with which every problem of building 
and arrangement has been attacked and conquered. 

"Efficiency of Use" 

One thing the Germans always make a point of mentioning 
— the area in actual use for manufacturing as compared with 
the theoretical floor area and ground area of the building. 
This "efficiency of use" is very important where real estate 
values are high and where it is desirable to use as little 
building material as possible. Every farmer is familiar with 
the fact that a field containing 10,000 square yards, if ten 
yards wide, requires 2,020 yards of fence, while the same area 
in the form of a square field 100 x 100 requires only 400 
yards of fence, but this is a principle seldom taken into con- 
sideration by capital when purchasing real estate or planning 
side-walls for factory buildings. In fact a careful analysis 
of the amount of floor space actually in use for manufacturing 
purposes, as compared with aisle space and wasted space, in 
most factories usually brings forth some startling percentages 
and results in a general rearrangement by which considerable 
room is salvaged for manufacturing operations and an im- 
provement in operating efficiency secured. 

This sort of analysis has perhaps been most general in 
this country in the case of offices in high rental buildings 
where it is disagreeably and frequently impressed upon the 
tenant that every square foot means dollars. In this field 
it has even reached the point where certain of our larger 



128 AMERICA VS. EUROPE IN INDUSTRY 

concerns — occupying offices in the great skyscrapers of New 
York and Chicago — are making a regular practice of calling 
in industrial engineers, just before their leases expire, with 
a view to rearrangement which will save space and increase 
the efficiency of operation. 

American Factory Architecture 

In America, building types have been pretty well classified 
and standardized as to materials as : 

1. Steel-frame fireproof ed type — fire-resistent — little 

used except for skyscrapers on account of its ex- 
pense. Steel skeleton is covered with fireproof tile, 
floors are of reinforced concrete, exterior usually 
of brick, stone, or terra cotta. 

2. Reinforced concrete type — fire-resistent — all struc- 

tural work of reinforced concrete and so heavier 
than the steel-frame type. Flat slab ceilings and 
roof, exterior walls of concrete or concrete faced 
with brick, stucco, etc. Perhaps the most generally 
used type for factory buildings at present. 

3. Steel-frame exposed type — fire-retardent — usually 

cheaper than above types but not so fireproof, as 
unprotected steel members lose their strength at 
about 1,000 degrees F. Walls of brick, concrete, 
corrugated iron, etc. 

4. Slow-burning mill type — fire-retardent when equipped 

with automatic sprinklers. Constructed of heavy 
timbers and protected by fire doors, etc. Formerly 
the cheapest type of building considered a good 
insurance risk. 

5. Miscellaneous temporary types — ranging all the way 

from the Hog Island buildings built of paper (box- 
board) with an estimated life of four years, through 
wooden frame buildings to certain types of steel 



FACTORY BUILDINGS 129 

buildings. All to be avoided — except in unusual 
circumstances — on account of their high cost per 
year. 

As to form we seem to have pretty well adopted the saw- 
toothed or monitor glass-roofed single-story building for the 
heavy machine and foundry work. As the equipment used 
becomes lighter we take advantage of the fact that we can 
save the cost of roof construction per thousand feet of floor 
space by putting more floors under a single roof. Of late 
we have been paying more attention to insuring an adequate 
supply of daylight — building narrower buildings or providing 
an interior court, which saves on side-walls although at the 
expense of roof construction. We have studied lighting — not 
only from the standpoint of quantity required but from the 
standpoint of diffusion and the reflective power of surfaces. 6 
Heat and ventilation have reached a very high degree of de- 
velopment in America, where we prefer to wear B. V. D.'s 
and burn coal rather than wear red woolens and save it. Some 
factories are even trying to induce girls to discard French 
heels and are providing their employees with chairs designed 
really to reduce fatigue. 

Within the last few years especial attention has been given 
to appearances both exterior and interior. We have found 
that machines painted attractively in light colors induce order, 
efficiency, and pride in work. And the expense has not been 
in proportion to the gain. One factory was designed in two 
styles — one purely utilitarian — a blot on the landscape suffi- 
cient to kill all community pride which existed — and one add- 
ing certain pleasing architectural features to the utilitarian 
framework. The cost of following the second plan was only 



5 New York, Pennsylvania, New Jersey, California, Oregon, and Wisconsin have 
laws regulating factory lighting. A survey of nearly 100,000 industrial accidents 
showed nearly 24 per cent of them were attributable to inadequate or improper illu- 
mination. The foot-candle meter has reduced illumination to an exact science and an 
immense amount of data has been gathered by the lighting engineers and published in 
the form of transactions of their national society. 



130 



AMERICA VS. EUROPE IN INDUSTRY 



4 per cent more and that building is now one of the hand- 
somest factory buildings in the world with a clock tower in- 
stead of a water tank and architectural features that would 
not be out of place in Oxford, Milan, or Paris. Plants like 
that of the General Electric Company at Erie, the Busch- 
Sulzer Brothers, Diesel Engine Company, the Hump Hairpin 
Company, the Continental Motor Company, the Brown and 
Bigelow Company, the Sillcocks and Miller Company, and the 
Kimball Building are not to be surpassed anywhere in the 
world. 

Value of Efficient and Pleasing Construction 

Probably no human development has been swifter or has 
entrenched itself more solidly as an accepted institution during 
the last ten years than the efficient factory building. A build- 
ing is something which not even the most skeptical may doubt 
since all may see and examine it in detail. It cannot be dis- 
regarded — like Cassandra or Savonarolla. A neat, well- 
lighted workroom is easier to understand than a revolutionary 
sales policy or a superior method of administration — so that 
the gospel spread with lightning rapidity and marked its prog- 
ress with enduring monuments. America and Germany have 
been the leaders in modern industrial construction— America 
because industrial units have sprung up so lately and grown 
so quickly — with labor expensive and scarce and money plen- 
tiful — Germany because of her love of scientific investigation, 
her attention to detail, and her realization of the necessity 
for meeting world competition. Other nations have followed 
this lead during the war until now the efficient, architecturally 
beautiful factory building — worthy to be the community 
center of an industrial community in an industrial world — 
has become an international and permanent asset. It is a 
good investment and will return dividends — not only in imme- 
diate profits but in the future welfare of the race. 



CHAPTER VI 

PURCHASE AND STORAGE 

An Example of Purchase Control 

The principles which underlie the purchase of materials 
and supplies and which affect their economical storage and 
distribution in the plant are perhaps best illustrated by a con- 
crete and personal example which reduces the procedure and 
its purpose to its elements. Let us assume then that in the 
calm days which preceded the great war, one Adam T. Wad- 
leigh — a most methodical man — each Saturday afternoon, 
after outstaying the other clerks exactly half an hour, in order 
to avoid impairing the reputation for conscientiousness which 
he had established during twenty-five years' service with "his 
firm," proceeded to Harrigan's Smoke Shop and purchased, 
from Ed. Harrigan himself, a box of Robert G. Child's guar- 
anteed cigars. These cigars, which he knew were honestly 
made of innocuous tobacco, and which he had convinced him- 
self, by casual inquiry elsewhere, could be purchased as cheaply 
at Harrigan's as anywhere, he paid for in cash and bore away 
to his "bachelor apartments." He locked his perfectos away 
in an ancient humidor. During the next seven days, after each 
meal, he abstracted one cigar, which he lit at the grate or the 
gas jet and smoked to the bitter end — with the aid of a weichsel 
holder and a bent pin. Inasmuch as he allowed himself double 
rations on Sunday and presented the janitor at the office with 
a cigar on Saturday he smoked his last cigar an hour before 
he again repaired to Mr. Harrigan's for his weekly supply. 
Inadvertently — and certainly unintentionally — Mr. Wadleigh 
then furnishes us gratis the perfect example of material pur- 
chase control and conservation because — 

131 



132 AMERICA VS. EUROPE IN INDUSTRY 

1. The material required was in stock and readily access- 

ible when needed. 

2. When the stock needed replacement the order was 

placed promptly and in such a way as to preclude 
misunderstanding. 

3. All purchases were duly authorized. 

4. The material was bought from a reliable firm which 

could be depended upon: 

(a) To have a stock on hand. 

(b) To make immediate delivery. 

(c) To maintain quality. 

5. The material was bought at the lowest- price consistent 

with dependability. 

6. Delivery was made safely and quickly. 

7. The goods were economically stored and in such a 

manner that : 

(a) They could be withdrawn from storage with 

the least expenditure of labor. 

(b) They could be withdrawn without delay in 

locating or in transporting to point of use. 

(c) They were in no danger of deterioration. 

(d) They were not likely to be destroyed or 

stolen. 

8. The store's layout was such that any unusual with- 

drawal from stores would be evident at once — 
making local demand without local supply impos- 
sible. 

9. Demand had been standardized. 

10. The most efficient lot had been determined, taking 

into consideration economy of purchase, conserva- 
tion in storage, cost of storing and transporting, 
and the like. 

11. Transportation was effected most quickly, most eco- 

nomically, and in the surest manner. 



PURCHASE AND STORAGE 



133 



12. Advantage was taken of all discounts. Postage, 

clerical and stenographic work was reduced to a 
minimum, as was also the demand upon the time 
of purchaser and of purchasee. 

13. The chance of error was reduced to a minimum. 

14. Credit risk was avoided. 

15. System and red tape was reduced to the vanishing 

point. 

16. The material was used for the purpose for which it 

was intended and there was no wastage. 

17. Quality and quantity per unit purchased was such 

that in its use the least amount of clerical labor 
was required and the least amount of auxiliary labor 
and supplies consumed. 

18. Costs were predetermined and operation was always 

100 per cent efficient. 

Degree of Elaboration 

The only difference then between the simple common sense 
purchase of the individual, as illustrated by Mr. Wadleigh's 
weekly peregrination, and that of the $100,000,000 corpora- 
tion is one of elaboration. In each case the principles are the 
same. That practical economist — be he industrial engineer or 
executive — who is personally responsible for the efficiency of 
operation of each great concern must convince himself that 
the elaboration is just sufficient, that the system is "tight," 
but that it contains not one more form or one more counter- 
check than is absolutely necessary. Otherwise the purchase, 
stores, and material conservation system is failing to earn its 
full dividend. 

Just how much elaboration is necessary in installing an 
economical purchase and stores system depends upon the type 
and size of the business. While the principles do not vary, 
local conditions vary greatly and trade customs in each line 



134 



AMERICA VS. EUROPE IN INDUSTRY 



of business differ widely, so that certain concessions usually 
have to be made to suit each case. 

Physical-Perpetual Inventories 

Not very long ago I read a prolonged discussion of the 
relative merits of physical inventories taken periodically and 
of perpetual inventories in which the balance is taken at 
will from the stores cards. In this article the inaccuracies of 
actual count made under pressure were contrasted with the 
inaccuracies of accumulated accounting errors on the cards, 
The horrors of "actual count" inventories, during which the 
"whole works" shuts down and nerve-racked clerks count 
hectically all night while customers clamor and operatives 
secure jobs elsewhere, were graphically described. Anyone 
who has experienced one of these feverish interludes will 
sympathize with the author who obviously spoke from the 
heart. Not so long ago I witnessed such a Marathon which 
began with colored gentlemen counting bolts under the super- 
vision of silk-shirted salesmen and ended with near nervous 
prostration for the auditor with the "actual count" inventory 
something over 12 per cent at variation with the "book count." 
Fortunately such spasms have been entirely unnecessary since 
the introduction of the physical-perpetual inventory. 

Under it the storekeepers every morning select a hundred 
or so articles of which the stock is visibly low, or which is 
for the most part in unbroken packages or otherwise arranged 
in units making quick counting easy. They make actual count 
of such articles and enter the result in red ink on the stores 
cards, thereby wiping out any errors which have accumulated. 
By doing this systematically every article in stores can be 
counted once a month, or once in three months, or as often 
as experience with local conditions makes the auditor feel is 
necessary. The physical inventory is continuous and disturbs 
nothing instead of being occasional and cataclysmic. At the 



PURCHASE AND STORAGE 



135 



end of the period everything has been counted and all the 
advantages of both systems have been obtained with a mini- 
mum of their defects. 

The plan is so simple that it is remarkable that it is not 
in more general use, involving as it does only the principle 
used by the Overland Limited, which takes water at full 
speed and changes diners and stoked engines at division points 
instead of emulating those early trains that ran only in the 
daytime and stopped for meals. In auditing under the physical- 
perpetual system, as in railroading, the work goes on while all 
is in motion, and the traveling auditor drops in unexpectedly 
but regularly and checks stock cards selected at random against 
the material in the rack and the supplies in the bins. We have 
outgrown periodic traveling, why continue periodic inventory- 
ing? 

Daily Material Disbursements — Value 

The matter of keeping the management informed daily as 
to the value of supply and material disbursements is exceedingly 
important. For some reason managers are accustomed to 
keeping in close touch with expenditures for labor, but in the 
majority of cases they seem to have long since despaired of 
being able to discover the value of material and supplies used 
until from four to seven weeks after the material is used, 
wasted, or stolen. Some quite large firms still wait until 
''their bills are all in" before figuring what has been expended. 
Inherited customs die hard and the American tradition has 
been to have the least intelligent clerk buy the labor while the 
proprietor personally watches the pay-roll — or to buy the 
material in person, and leave the accounting thereof for casual 
inspection in the far future when the story can have little but 
historical interest. 

What is the use of going out and consulting with Bill or 
Hank about the waste of oil in their departments six weeks 



136 AMERICA VS. EUROPE IN INDUSTRY 

after the peak charge was incurred? Why should Pete or 
Hank try to be economical if the "old man" does not know 
how much oil should be used? How can the old man know 
how much should be used if he is not informed day by day 
how much has been used with satisfactory results? Apply 
the same sort of questions to almost any indirect material 
and the necessity of having data which makes it necessary 
for the statistical department to tabulate by periods, and for 
the industrial engineering department to investigate with facts 
at their command, will be evident. 

Standard Maximum and Minimum, Stock 

The determination of the standard maximum and minimum, 
stock is a matter which should not be neglected. A printing 
concern not long ago was saved over $10,000 through such 
a determination by an engineer whom I know. The work 
of standardizing the stock had just been completed when 
notice of a contemplated rise in the price of paper was received, 
and the concern, knowing its requirements with reasonable 
certainty, was able to order a year's supply. The stock cards 
themselves after a few months contain sufficient data to make 
it fairly evident how long is required to secure a new stock 
under normal conditions. The greater the period covered by 
the record the more certain and valuable the information that 
careful analysis will bring forth. It is well, if purchases are 
large, to have a place on the stock- cards for the various lots 
on which special discount may be obtained. This makes it 
possible to buy more cheaply when an order is of such magni- 
tude that the addition of a few units will bring the order within 
the next discount area. 

Systematic Preparation for Purchasing 

The actual purchase of the material is a matter of strategy 
and psychology. The strategy consists in careful and syste- 



PURCHASE AND STORAGE 



137 



matic preparation for the attack. The psychology is the comple- 
ment of the psychology of salesmanship, concerning which 
whole libraries have been written. By this I do not mean 
that because a salesman is professionally a pleasant fellow, 
a purchasing agent must necessarily be a crab. He has quite 
as much need for wide acquaintance and warm friends as the 
salesman, and will be very short-sighted if he allows his knowl- 
edge of sales methods to destroy his humanitarian outlook 
and to pervert him to that cheap cynicism which delights in 
the discomfiture of those whose livelihood depends upon one's 
favor. 

The strategy of purchase varies with the business and 
with the ability of those who direct the business. Some four- 
teen years ago when I was trying to get some of the final depart- 
ments of a factory in the Alleghenies to synchonize with 
the rest of the plant, the officer of the company who did the 
purchasing phoned me during dinner to be ready to go to 
Buffalo in an hour. All that night our touring car roared 
and careened through the fog. At 7 A. m. he walked into the 
largest junk shop in Buffalo : 

"Gimme a 10 horse-power D. C. motor. Put it in the 
tonneau." All that day we climbed and skirted mountain 
streams and all that night the faithful Jake tinkered with bear- 
ings and counter-shafts. The second morning our machinery 
was in operation. That is one sort of purchasing. 

Last winter while I was waiting to lecture before the 
Graduate School of Commerce and Finance at a certain uni- 
versity, the vice-president of a great jobbing house told me 
of an organization for gathering statistics which determined 
purchases amounting to millions annually. The daily reports 
of thousands of salesmen were analyzed continuously — crop 
reports, rainfall statistics, political opinion, were gathered into 
the hopper, and out of this mass were evolved hard, cold basic 
facts, which told that company with absolute certainty what to 



138 AMERICA VS. EUROPE IN INDUSTRY 

load up on and what to leave alone. How would you like to 
have a statistical machine which would tell you thirty days 
before election the autumn of every presidential year just 
how every state was going to vote, without missing the predic- 
tion more than two electoral votes in twenty-five years ? What 
chance has the "gimme a motor" type of purchasing strategist 
against scientifically predetermined conditions such as that? 

Examination and Follow-Up 

A friend of mine once worked for a grocer who kept what 
he called a "boob register." The volume which had earned 
itself this dignified pseudonym hung by a string behind the 
counter and contained the names of those women who, expe- 
rience had taught the proprietor, neither counted the eggs nor 
weighed the sugar. A special clerk known as "the swindler" — 
as my friend declared by all that was holy — waited on these 
women and systematically short-weighted them, so that the 
thrifty proprietor in a measure recouped himself for the 
losses occasioned by such other customers as found it cheaper 
to flit than to pay bills. Statistics as to the reliability of firms 
and their pet "thrifts" are necessary if the purchaser is to buy 
safely and is to avoid a place in the "boob registers" of certain 
"slick" firms with consequent disillusionment and cost to his 
company and to himself. 

Under excessive market demand the follow-up may become 
the largest duty of the purchasing department. Several years 
ago conditions in the automobile business were such that each 
firm in Detroit kept a force of stock-chasers and inspectors 
in every factory from which parts were bought. The disorder 
and bickering which resulted from having a crew of this sort 
in each factory, fighting with each other and with the superin- 
tendent whenever they felt that a rival was being favored, 
is better imagined than described. Even worse conditions pre- 
vailed in firms running on war orders for several branches of 



PURCHASE AND STORAGE 139 

the service. The remedy is, of course, careful and relentless 
scheduling with an occasional heart-to-heart talk between the 
heads of the purchasing and selling concerns when inspectors 
become overzealous. 

There is no standard purchasing system which can be 
guaranteed to meet the needs of every business. A system 
which is logical and which contains a minimum of opportunities 
for error and for dishonesty can in every case be worked out 
with comparatively few forms and with but little reduplication 
of work if the principles illustrated by the simple performance 
of Mr. Wadleigh are kept firmly in mind and if the value to 
the management of adequate, accurate, immediate records is 
realized to the fullest extent. 

Horizontal Foot-Pounds 

Scientific storage is largely a matter of predetermining 
conditions and of routing. To make clear exactly what is 
meant, suppose we dodge Rankin's terms and all symbols 
involving consideration of velocity and resistance and invent 
a very unscientific unit of work which we will call the "hori- 
zontal foot-pound" — allowing the term to describe the effort, 
human or otherwise, required to transport, by any constant 
means, one pound of goods one foot. In planning a storage 
yard or storeroom, the prime requisite, if unnecessary effort 
in the transportation of goods is to be considered, is to arrange 
a layout which in actual operation will require the minimum of 
expenditure of "h.f.p." year in and year out. 

Determination of Weight 

This requires first a determination of the weight of each 
material which can be stored on each square foot of space, 
when piled to the height which is most efficient, taking into 
consideration, the means of stacking, mechanical or otherwise, 
which are available. 



140 



AMERICA VS. EUROPE IN INDUSTRY 



It is obvious that it would not be economical to store 50 
tons of empty barrels piled 6 feet high for the first 500 feet 
about a railway loading and unloading platform, thereby forc- 
ing the same weight of pig lead to be stored 600 feet away 
from the point of arrival and departure when the demand 
by weight for each was the same. Such an arrangement would 
involve the transportation of a heavy weight 500 feet every 
time any lead was required, while if the lead were stored close 
to the platform the entire 50 tons would, if also piled 6 feet 
high, occupy a few square feet only, making it unnecessary 
to go more than 10 or 15 feet when barrels were required. 
The rule then, other things being equal, should be to concentrate 
the goods of which the greatest weight can be stored in a unit 
of space the closest to the points of arrival and departure, as 
in this way the fewest pounds will be moved the fewest feet. 

Rate of Turnover 

The second requisite for scientific storage is a determination 
of the rate of turnover of each material. This is a principle 
which is known to every country storekeeper who keeps his 
cigars and candy near the front door and his Christmas goods 
and crockery in the attic in order to save himself steps. In 
the case of the candy the turnover is about 10 or 12 times 
a year, while crockery stock is not turned over once a year. 
According to this principle, if our 50 tons of pig lead were 
required only once in 10 years, while the 50 tons of barrels 
were all removed from storage once a day, it would be more 
economical to pile the lead somewhere out in the Bronx of 
the storage yard, while the barrels were stored at its Broad- 
way and Forty-Second Street intersection. 

Applying the Principles 

The enumeration of these two principles brings us to the 
practical method of application. This is perhaps best illustrated 



PURCHASE AND STORAGE I 4 I 

by an arrangement of a yard which covered about five acres 
upon which were stored over $300,000 worth of miscellaneous 
products. These were first listed according to the weight 
which could most economically be stored on a certain number 
of square feet of ground. They were then listed according 
to the previous years' sales in tons and from these two lists 
was worked out the priority of right of each to storage space 
nearest to the points of manufacture and departure, which 
were close together. The final arrangement follows : 







Weight per Unit 




Previous Sales 


Priority 


Place 


Material 


of Storage Yard 


Material 


(in Tons) 


of Place 


I 


A 


13.96 


B 


3613 


B 


2 


B 


13-05 





3380 





3 


C 


12-95 


H 


2050 


H 


4 


D 


12.25 


G 


1778 


E 


5 


E 


I2.I8 


E 


1676 


Y 


6 


F 


12.00 


Y 


1487 


P 


7 


G 


10-75 


P 


1339 


U 


8 


H 


10-75 


U 


1324 


C 


9 


I 


10.71 


c 


1242 


W 


10 


J 


10.25 


I 


IOI9 


Y 


11 


K 


10.10 


CC 


869 


G 


12 


L 


10.06 


w 


865 


I 


13 


M 


9-95 


N 


857 


M 


14 


N 


9-74 


BB 


724 


J 


15 





9.66 


J 


673 


K 


16 


P 


9-57 


M 


635 


CC 


17 


Q 


9-57 


K 


529 


BB 


18 


R 


9.40 


X 


279 


X 


19 


S 


9.23 


A 


251 


Q 


20 


T 


8.80 


Q 


241 


R 


21 


U 


8,16 


R 


234 


Z 


22 


V 


8.13 


z 


172 


A 


23 


W 


7-99 


D 


141 


D 


24 


X 


7-25 


S 


125 


S 


25 


Y 


7.21 


L 


123 


L 


26 


Z 


7.14 


F 


113 


F 


27 


AA 


6-53 


T 


37 


T 


28 


BB 


5-37 


V 


37 


V 


29 


CC 


5-25 


DD 


36 


DD 


30 


DD 


5-io 


AA 


30 


AA 



142 



AMERICA VS. EUROPE IN INDUSTRY 



It is, of course, obvious that the final arrangement is 
worked out only on an approximate horizontal foot-pound 
basis. In this particular case it was necessary to take various 
other factors into consideration, a discussion of which would 
entail the presentation of a mass of detail out of place here. 

Just how far an industrial engineer or a manufacturer is 
justified in working to the final detail, in applying this prin- 



/////////// 



Figure 13. Tabor Company Shelf Storage Unit 

ciple — or any principle — depends upon circumstances and the 
press of other more important work. To my mind the safe 
rule is to apply the principle in just as great detail as will earn 
a profit on the cost of doing the work, providing a greater profit 
cannot be earned elsewhere for the same time and money. 

Storage Units 

The next step in planning the layout of a storage yard — 
or of a storeroom — is the determination of storage units. While 



PURCHASE AND STORAGE 



143 



ground arrangement naturally depends upon the material to 
be stored and upon the topography of the storage place, it is 
usually possible to adhere to some plan of layout which pro- 
vides for subdivisible standard units. This rule covers every- 
thing from shelf storage units as worked out by the Tabor 
Manufacturing Company to hundred-foot storage sections in 
a lumber yard. 



Aisle Marking Pasf. 






50 
A 



1 y & . 



U H 



5 "Kiln 
'■Band. 



■e 



„>2"P'pe 



Concrete 



F 50A 



■5IA 



Storage Shed 

-■Concrete 



K„ v " V. V. V v. V V V * V. 
52 A 52B 52C 52 D 52E .52F 526 5ZH 52? 52K 



53 A 53 B -53C -53 D 



V. V. v. • 

54A -54B 54C 



55 A .55 B 



~56A 



.57A 



58A 



,59A 



60A 



'6IA 



■Concrete 



Jc. 



.Concrete 



.Concrete 



if 

4-*- 



__^.. -Section Harking Post. 
2" Black LetterM~ 

White:'' 



Creoso+ed'l 



Concrete 






^H- 



W V 'sr 



,Concrate 



Division Post 
'•As Sect-ion Marking 
Post Unlettered 



6ZA 



■63A 



Figure 14. Diagram of a Division of a Scientifically Laid Out' Storage 

Field 

The Tabor Company's scheme simply provides stacks of 
wooden shelves approximately 18 inches deep, two feet apart, 
and with vertical partitions about every four feet, as shown 
by Figure 13. Each compartment can be used as it stands, 
or it may be divided into four 2x1 foot compartments by 
the insertion of eight boxes, and so on. The same principle 
was applied in the storage fields shown in Figure 14. In 



144 



AMERICA VS. EUROPE IN INDUSTRY 



this we laid out each field in eight subdivisions ioo x 250 
feet, bounded by concrete aisles. Each subdivision contained 
ten sections 50 x 50 with every section reachable from an aisle. 

Numbering Storage Units 

The adoption of a plan of numbering the storage sections, 
that may be easily learned, is important. One of the oldest 
and most mistake-proof systems is one used in numbering 
theater seats, which uses letters one way and numbers the 
other. A variation of this is used in Figure 14. Such a 
plan makes it possible for a trucker, who has never been on 
the field before, to simply follow the road until he comes to 
the aisle post designated and then turn aside and proceed along 
the aisle until he reaches the section post. If he is familiar 
with the sequence of numbers and of the letters of the alpha- 
bet he always knows just where he is as regards his destina- 
tion and the exact direction of his destination. When, there- 
fore, he has received a move ticket marked "52 — D" there is 
little chance of his making an incorrect delivery. 

Planning the Layout 

The next problem which confronts the man who is plan- 
ning a stores layout is one that requires analytical ability, 
courage, and the art of prophecy. If the business be an old- 
established one — static and in a rut — it is comparatively easy 
to determine just how much space will be required for each 
variety of stores. If the business be new, or growing, courage 
and a prophetic hunch must point the way. In any case, the 
horns of the dilemma consist of the possibility of either laying 
out more space than the goods to be stored require, so that 
wide gaps between the different varieties stored necessitate 
the expenditure of unnecessary "h.f.p.," or of laying out 
too little space, which means that eventually one variety of 
goods will have to be stored in two or three places. 



PURCHASE AND STORAGE 145 

The latter fault is not very serious if an adequate card 
index showing the aisle and section number of each article 
stored is provided. Even so a certain graphic feature is lost 
which in some cases is highly important. 

Graphic Repair Part System, 

About ten years ago a $1,000,000 factory on the Pacific 
Coast bought most of its machine parts in Ohio and Pennsyl- 
vania. Although an effort was made to keep a good supply 
of repair parts on hand, entirely too often a 200- or 300-pound 
casting was rushed across the continent by express in answer 
to an agonized wire. To prevent such occurrences and the 
attendant production losses, a graphic repair part system was 
devised. This consisted of a subsection in the storeroom for 
each, type of machine. In this compartment were racks, pegs, 
and holes, each one of which supported or contained a part 
or a standard package of parts. These racks, pegs, and holes 
were grouped and located in such a way that if one of them 
were empty the fact was evidenced at once to anyone stepping 
into the compartment. Furthermore, red danger lines were 
painted which would force the fact upon the observer's atten- 
tion that the stock was getting dangerously low. Thus if 
there were ten pegs provided for a certain sort of pinion, and 
previous experience had taught the storekeeper that it was 
unsafe to have less than six on hand, eight of the pegs would 
be painted red so that as soon as a red mark was uncovered 
it would be impossible to ignore the fact that it was time to 
order more if the minimum of six were to be maintained. 
The same scheme can be used to advantage with such supplies 
as sacks, nails in kegs, and even brooms and smaller supplies, 
the principle being to provide a container which will disclose 
a red line or other danger signal which cannot be ignored 
when the minimum safe stock is reached. It is the same 
principle as the red sheet in the desk calendar which about 



I 4 6 AMERICA VS. EUROPE IN INDUSTRY 

December I beseeches you to order a new ''complex filler," 
and inasmuch as an empty peg, compartment, or space painted 
a flaming red catches the eye, the storeskeeper or even the 
superintendent, making his periodic progress through the 
plant, cannot miss seeing the danger and providing accord- 
ingly. Express charges and production delays were reduced 
in the plant in question and modifications of the plan are 
now in quite general use in the automobile industry. 

One of the advantages of the Tabor system of storage 
cases is that it is possible to expand a section containing a 
certain supply at comparatively little cost, since each box, 
being similar to a drawer, may be removed from its position 
with its contents intact and inserted in another case further 
on at very little expense. This saves a great deal of handling 
in the case of bolts and the like. Another plan which reduces 
rearrangement costs is that of keeping the smaller sorts of 
supplies sealed in the original packages. This also greatly 
facilitates inventorying as it makes it necessary to count only 
the packages and the loose pieces. Articles not arriving in 
standard packages may be strung on cord, so many in the 
string, or wrapped and labeled by hundreds or dozens. Groups 
of larger units, such as piles of castings, may be ringed with 
paint or waterproof crayon so that removal of a unit from 
the pile is at once evident. It is also very often advisable 
to paint the number of castings, or bricks or boards contained 
in the pile on one of the units where it can be easily noted. 
In this way if the painted "seal" is unbroken the pile may 
usually be assumed to contain the quantity so designated. 

Piling Methods 

In the case of large packages, barrels, castings, boxes, and 
bales, piling methods must be worked out for each sort and 
weight stored, and the best place to work out the method is 
on the storage ground where actual handling difficulties can 



PURCHASE AND STORAGE 



147 



be studied. For example, not long ago a man informed me 
that cylindrical objects should always be pyramided, as it was 
then necessary to block only the two ends of the bottom tier 
to prevent the pile from rolling and because cylindrical objects 
were most easily counted when pyramided. Anyone with 
practical storage experience would, of course, have known that 
sewer pipe or shell cases, for instance, when piled in such a 



METHOD "A' 



METHOD' 







Roof Line 
















jSQQQQQQC 














FloorLevel. 


VxYxYxYr 






k - - 


- - -61'- 




— > 





AtoB(3)xAtoC(3l)iEF6(3)=93 Cylindrical Units, piled on 

a Space 6x 61 or 366 5q. Ft ( Unih per Hundred 5q. Ft\ ycA 

\of Roof or Floor Space ] ' ' 

n 00 f Line 



Floor Level. 



k -61- ----- - — H 

A+B+C(3)+D+E(?)+F(l) =6x//=66 Cylindrical Unifspiled 
on a Space 6x61 or 366 5q. Ft (Units per Hundred Sqft^.^^ 
\of Roof or Floor Space. J 

Figure 15. Relative Efficiency of the Two Most Common 
Methods of Storing Cylindrical Objects 

Efficiency of the use of roof and floor space then is: 

18 
m 70 per cent 



25-4 
in method B as compared with method A. 
ining .contents cf A. 



Note simple methods of determ- 



way would be no easier to count than if piled in the form of 
a truncated pyramid and that the labor of hoisting the ma- 
terials in question to an apex 30 or 40 feet in the air would 
be out of all proportion to the advantages gained if the piles 
were of any magnitude. In the case of small pyramids the 
waste of ground space, and "h.f.p." on all stores trucked 
further on in consequence would be excessive. Room must 
not be wasted if all articles stored are to be moved the shortest 
possible distance. When stored goods are shedded this is 
doubly important, as waste of ground then also means waste 
of roof — which means waste of construction labor and ma- 
terials. (See Figure 15.) 



148 AMERICA VS. EUROPE IN INDUSTRY 

"Most Efficient Package" Principle 

Planning the most economical height of pile for each sort 
of goods involves the application of the "most efficient pack- 
age" principle. By this I mean the principle which makes 
it possible for a man to handle bricks, two at a time, at the 
rate of 60 tons a day, while it would be physically impossible 
for him to handle 60 tons of rice, a grain at a time, or 60 
tons of grand pianos, one at a time, in the same period. The 
material itself very often determines the size of the package, 
but we can sack our rice in convenient units, and we can 
disassemble our grand pianos if it be strictly necessary for 
one man to handle them alone. When handling-machinery 
is available the problem is again modified. Since handling- 
machinery usually possesses a limited range, as in the case 
of a traveling crane, or else must be moved, as in the case 
of a locomotive crane, it is especially necessary to plan in 
such a way as to conserve storage space. 

The very method of moving goods from one part of a 
storage yard to another very often brings into play the "most 
efficient package" principle. Contrast, for instance, trans- 
portation of goods by wheelbarrow as against transportation 
by truck. With a material like gravel one man with a wheel- 
barrow will move perhaps 300 pounds. In a dump-car on a 
portable track he can push over a ton. In the second case 
every time he moves his "package" a thousand yards he 
moves about seven times as much material as in the first case, 
and with the proper track and grade moves it about as fast. 
On the other hand, if only a ton or two of material were 
to be moved to a certain spot, the track-laying would cost 
more than would be saved by the cheaper transportation. 

Method of Transportation 

Where great flexibility is required or where the hauls are 
short, the heavier and more expensive equipment is uneco- 



PURCHASE AND STORAGE 



149 



nomical. Milkmen are still peddling to individual customers 
with the antiquated horse and cart, and the Post-Office De- 
partment delivers our mail by means of a man with a sack 
instead of by motor truck. A stop-watch in the hands of 
a competent observer will often save the manufacturer an 
investment in expensive apparatus, which bitter experience 
will later force him to discard at a loss. Only recently an 
analytical time study saved one manufacturer an investment 
of $12,000 in tractors and trailers, which, had they been 
purchased, would have cost $10,000 a year more to operate 
than the rather primitive trucking methods in use. The 
tractor and trailer system is usually a great labor-saver, but 
in this particular instance it lacked the required flexibility as 
the time study proved, contrary to the hopes and preliminary 
judgment of everyone concerned. Locomotive cranes and 
steam shovels are sometimes most uneconomical. There is 
one type of portable conveyer which I have seen in at least a 
dozen factories, but never seen in use. It is one of those things 
which "listens well" and which can be forcibly demonstrated 
on paper, but I have never yet found a superintendent who, 
after thorough tryout, felt he could afford to have it used. 
There is such a thing as getting out a battleship to kill a bull 
dog — and it doesn't pay. 

Rearrangement of Yard 

In rearranging a storage yard the engineer is always con- 
fronted with the unfortunate fact that he cannot hold one 
pile of goods suspended in the air while he transfers some- 
thing else into its place. If he is willing to spend money 
enough everything can be moved out and a fresh start made, 
but this is expensive. In consequence the novice usually com- 
mits his plan carefully to paper, nails a blue-print showing 
the proposed arrangement on the wall, and laboriously explains 
what he desires to do to the group of foremen who control 



150 AMERICA VS. EUROPE IN INDUSTRY 

the truckers. His words are received in respectful silence 
and the plan is approved. A couple of mornings later he 
goes out and finds a hundred tons of material stored in his 
main traffic artery. He calls in Pat, the foreman, and asks 
him why, by all that is holy, did he wreck his "city beautiful. ,, 
Long explanations and profound regrets ensue, and upon 
expression of proper contrition Pat is allowed to depart. A 
few days later Mike submarines his Place de la Concorde and 
the next day Tony applies kultur to his Grand Union Station. 
Then, in the hope that the boss will forget, our brilliant young 
optimist hangs a Safety-First poster over his blue-print and 
becomes engrossed in time-studying the milling machines. 

There is just one way to rearrange a storage yard, that is, 
issue a move ticket, or its equivalent in some sort of a written 
instruction, to every trucker who is allowed to invade the 
sacred precincts and then to nail the hide of any trucker who 
lays hand upon anything without such an order, upon its out- 
ward wall, where all would-be vandals may see and ponder. 
I was once an optimist myself and I know ! 

Control of Stores 

In connection with the usual supply storeroom consider- 
able economy can often be effected by the establishment of 
substations. It is much better to furnish certain sorts of 
workmen with a locker and to deal them out a keg of nails 
or a package of some sort of bolts in constant use, than it is 
to have them leaving their work two or three times a day to 
take out an apron full of nails or a dozen bolts. In such 
cases the men in question should be made to account for the 
use of such articles and should be frequently checked up on 
the rate of use. This applies, of course, only to such men as 
car-bracers, carpenters, etc., who are on regular sorts of work 
which does not allow the accessories to be delivered with the 
materials. 



PURCHASE AND STORAGE 151 

The use of oil and other supplies, upon which the demand 
should be fairly constant, should be checked up by depart- 
ments, by machines, and by individuals, in such a way that 
unusual fluctuations will be evident and can be investigated 
at once. Doing this involves an analytical study of the plant 
with like machines grouped, and usually leads to considerable 
economies being effected. In one instance such an investiga- 
tion resulted at once in a change in the sort of oil used for 
a certain purpose which saved the company $1,500 per 
year. 

All portable stores which cannot be locked within the store- 
room proper should be surrounded by barbed wire entangle- 
ments of some sort, sufficiently strong to prevent pilfering. 
This applies to certain sorts of castings and to lumber espe- 
cially. A regular loss of from 3 to 4 per cent of a plant's 
lumber stock is by no means uncommon in a "shanty" neigh- 
borhood. 

Finally a graphic analysis of all stores should be made 
in such a way as to keep the exact value of each variety of 
stores before the purchasing agent and management at all 
times. This should not enter into more detail than is required 
constantly to inform those in control of the business policy 
how much money is tied up in the principal varieties of steel, 
brass, copper, lumber, leather, and the like. Continuous in- 
formation of this sort is the surest safeguard against unneces- 
sary interest charges and against excessive loss through market 
fluctuations. 

Stores control, considered alike from accounting, physical, 
and financial standpoints, is constantly becoming more and 
more of an exact science, and the firm which continually 
analyzes its methods and keeps abreast of the latest practice 
will not only effect considerable economies of labor and of 
materials but is in the best strategic position to meet trade 
competition. 



I 5 2 AMERICA VS. EUROPE IN INDUSTRY 

American Storage Methods 

In America the procedure of purchase and the bookkeeping 
in connection with stores have been worked out very fully. 
Storage methods — so far as the physical arrangement of 
stores is concerned — have usually been left to the factory 
superintendent, who contents himself with providing the yard 
boss with a "yard" and the storekeeper with a storeroom 
and then plunges into the manufacturing problems with the 
result that the yard is laid out and the procedure planned by 
a man whose strong point is bawling at "rough-necks'' and 
the storeroom by a clerk who is afraid to get his hands dirty. 
As a result these two departments are usually the least efficient 
about the plant. 

Italian and French Methods 

In Italy there are some very neat storerooms and some 
yards very well equipped with cranes, but in general condi- 
tions average no better than in America. 

In France conditions in the best plants are similar to those 
in our own best plants, although in some cases, as at the 
Berliet plant, graphs are used to indicate what proportion 
of the stock reserved for the cars entered on the manufac- 
turing program has been issued from stores. These graphs 
are entered on a 6 x 14 card divided into lot numbers by 
narrow vertical lines. As these lots are issued to the factory 
the spaces between lines are blotted out with solid blue shading. 
The reserved stock on hand is shown by a blue horizontal 
line — later blotted out as the stock is issued — so that the 
superintendent can tell by glancing at the card just what propor- 
tion has been issued, what is on hand, and what is still to 
come. The plant uses a "balance of stock card" similar to 
our own, bearing the requisition number, pieces received, pieces 
issued, and to whom, balance of stock, etc. All bins in the 
storerooms — which are spacious, well lighted, and admirably 



PURCHASE AND STORAGE 



153 



located and arranged — are numbered serially and are equipped 
with a neat metal pocket into which cards may be slipped 
showing the contents of the bin. 

At the Renault plant especial attention has been given 
to yard layout. Aisles and sections are carefully laid out 
and marked by numbered posts. Castings are arranged in 
orderly piles and the lot and control number are printed on 




Figure 16. Yard Storage and Transportation at the A. E. G. 

Note numbered stations 

the top castings on each pile. Special steels are painted dif- 
ferent colors and there is a color chart in the stores office 
showing the source of each variety. Wherever heavy material 
is to be handled, overhead cranes are provided. Trucks and 
trailers are used for the transportation of the lighter materials. 
The Berliet plant is equipped with a thoroughly modern 
toolroom, in which tools are made and sharpened by specialists 
and stored ready for use. The same arrangement is also in 



154 



AMERICA VS. EUROPE IN INDUSTRY 










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PURCHASE AND STORAGE 155 

force at the Schneider establishments, where the delivery of 
the tools required for each job, to the man on the job, is 
arranged for by the planning department. 

German Storage Methods 

The German system most nearly qualifies under the stand- 
ards set forth in the early part of this chapter. In the yard 
at the Brunnenstrasse Plant of the A. E. G. standard gauge 
box-cars and gondolas filled with castings, pass directly under 
the steel frames, which support the traveling cranes. These 
frames, 350 feet long, are set 100 feet apart 35 feet above 
the ground, and the cranes have a lifting capacity of 15 tons 
each. By the use of electric magnets and a collection of 
exceedingly ingenious grab hooks, buckets, and other devices, 
the railroad cars containing materials and supplies are un- 
loaded with great expedition and their contents stored — the 
castings as shown in Figure 16. The methods of shunting 
cars and of unloading box-cars mechanically are shown in 
Figures 11 and 12, pages 125 and 126. The orderly arrange- 
ment of the castings, the pile number on the plate near the door, 
and the method of transportation should be especially noted in 
Figure 16. 

Special steels are painted distinguishing colors as in France 
and a color chart is kept in the storeroom so that the sort 
and the source are readily determined. In piling round iron, 
shafting, and other shapes likely to roll, square separating 
bars about half an inch square with turned up ends are used 
to separate the layers in the pile. This permits square piles 
and the disengagement of bars with less danger to the workers. 

Figure 17 shows the A. E. G.'s method of arranging a 
general storeroom. Particular attention should be given to : 

1. The method of rack construction — steel frames, 
wooden shelves, expanded metal partitions admit- 
ting light freely to each shelf, etc. . 



156 



AMERICA VS. EUROPE IN INDUSTRY 




PURCHASE AND STORAGE 



157 



2. The division of all stores into lots easily counted either 

by the use of the boxes in which they arrived, by 
making into bundles, by the use of portable trays, 
or by arrangement on the shelves. Note the top 
shelf under the counter at the left. 

3. The serial numbers on each rack, on each shelf section, 

and on each tray. 

Figure 18 represents a substation located in a special de- 
partment. Particular attention should be given to the case 
construction as in the previous picture and to : 

1. The large signs directing the workmen to the various 

sections where different classes of supplies are to 
be obtained. 

2. The demonstration boards showing all sizes and varie- 

ties of each class of supplies. This enables the man 
who knows what he wants but whose power of 
description and sense of dimension are poor to make 
it clear to the storekeeper the exact thing he wants 
in the shortest possible time. 

3. The adaptability of the cases to diverse classes of 

goods from large sheets of fiber stored on end to 
bolts in trays. 

4. The creosoted wood block floor, the slippers worn by 

the workmen, and the lighting arrangement which 
includes sun curtains. 

5. The use of scales for counting castings. 

In the A. E. G. plant, patterns are stored in a fireproof 
building on numbered racks. Each pattern is numbered as 
is each shelf and tier of racks and all is carefully indexed 
so that the location of each pattern can be determined in an 
instant. 

When stores are required for a new job the bill of ma- 
terial is sent to the storekeeper in an envelope together with 



158 AMERICA VS. EUROPE IN INDUSTRY 

a tag for each part, numbered in accordance with the bill of 
material. These tags are attached to the various parts and 
act as a move ticket directing destination, providing for identi- 
fication, etc. When the last tag is gone from the envelope 
the storekeeper knows the material is all on its way to the job. 

When the workman enters the plant he is presented with 
an illustrated tool book which gives the type and number of 
tools needed ordinarily for his particular job. He immedi- 
ately goes to the toolroom and gets the tools called for by 
the book. When he leaves the department he must return the 
tools or pay for them. 

When a job is assigned to a workman he is given a blue- 
printed list of any special tools required. He draws these 
tools from the toolroom, depositing in return a brass check, 
which makes him liable for the prompt return of the special 
tool. 

While workmen call for their own tools at the A. E. G., 
at the Loewe plant the storeroom is equipped with an electric 
bell system similar to that used in old-fashioned hotels, where 
a number drops down in a case indicating which room is 
ringing. Workmen are then provided with the proper tools, 
etc., before they begin work on the job. Should they get into 
difficulties and require other tools or advice from the foreman 
they can ring a bell located at their station, whereupon a bell- 
boy arrives to serve them — thus making it unnecessary for 
them to stop their work to go to the storeroom or to hunt the 
foreman. 

The Germans may not call it "scientific management" but 
there is not much they overlook in the way of staff work — 
planning everything to the last detail — before action begins. 
In comparing methods it must be borne in mind always that 
the German workman is highly skilled and thoroughly trained 
for the particular work he is to do. Furthermore, the will 
to work has been ingrained in him since he was a child. Con- 



PURCHASE AND STORAGE 159 

sequently he doesn't need the amount of showing, telling, 
teaching, and cussing that a man fresh from the plow — 
whether in Slovakia or Arkansas— needs when he is given a 
machine to run in a Detroit automobile factory. 

English Storage Methods 

In England storage methods are in rather an elementary 
state except for the plants run under scientific management. 
In one such plant I found the graphic repair part system with 
red danger lines in use. Each pile and compartment carried 
a card showing the maximum and minimum stock permissible. 
When the pile shrank to the minimum, entries of all reserved 
stock were made on a special tag hanging to the card inserted 
in the compartment slot. This saved clerical work because 
reserves were not entered until the minimum was reached. 
Furthermore, the fact that there were figures on the special 
tag acted as a danger signal. 

Another novelty was a check on the inventory by the use 
of a valuation at an arbitrary standard base price — usually 
less than the actual value — for the semiannual counts. The 
alteration in the value of stock on hand — as compared with 
the arbitrary basic price — is then figured and the alteration 
plus the base value (figured from actual count) must check 
with the stock at the purchased price value as shown by the 
stock card inventory. Besides furnishing a check approved 
by the chartered accountants and bringing to light errors in 
counting, the system accentuates the increase or shrinkage in 
inventory values as compared with a fixed base. Used stock 
is figured at the oldest price, or at the next oldest if a second 
lot is cut into. 

In some of the more modern large steel plants exceedingly 
well-built pattern storage buildings are in evidence. These 
are laid out and indexed much the same as at the A. E. G. 
Where the American gallery type of building is used — heavy 



160 AMERICA VS. EUROPE IN INDUSTRY 

machines on the ground floor, which is open to the roof, with 
balconies around the sides for light machines and handwork — 
all light stores are taken directly to the gallery storerooms 
which parallel the progressive assembly. Heavy stores are 
brought in from the general storeroom as needed. 

Perhaps the most perfect stores system I encountered was 
that at the Renold plant in Manchester. In the first place 
the purchase and stores department had its own testing labora- 
tory — as separate from the sales and factory laboratories. 
Furthermore, the storeroom itself was equipped to give every 
rod received the sparking test as it arrived. Small electric 
cranes moved the material directly from railroad cars to its 
destination in the galleries or on the main floor. All bins 
were numbered serially and the location of the stock was 
recorded accordingly. The stores office was equipped with 
a control board uniform with those in the other departments 
(see Chapter X), upon which the transportation of material 
needed in the various departments was planned and the work 
dispatched, just as if the storerooms were a manufacturing 
department — which, of course, it really is, even though it is 
generally regarded as an excrescence. 

My conclusion in the matter of storage is that the brightest 
minds in all countries are working along the same lines — as 
they must — since there is only one best way in anything, where 
conditions are identical. The average is highest in Germany, 
where disorderliness of every sort has been "verboten" for half 
a century. France, England, Italy, and America, however, 
are all waking up to the possibilities of economy. The condi- 
tions of demand and distribution are being carefully ascer^ 
tained, and physical layout and systematic control designed 
in order to insure the movement of material not only at the 
exact time it is needed most but also without waste, and at 
the least cost. 



CHAPTER VII 

MACHINES 

Machinery and Labor 

In spite of the outcry of our socialistic friends, it is the 
machine which has given the workman of today his leisure 
and his comfort. If you do not believe it contrast the life of 
the Detroit "wage slave" with his eight-hour day, his "tin 
Lizzie," and his evening at the movies with the life of the 
"independent craftsman" who still survives in one of the hulls 
which even yet linger in the outskirts of Sheffield — fashioning 
knives twelve or fourteen hours a day over a grindstone and 
amid sanitary surroundings which would outrage the feelings 
of a self-respecting Iowa hog. Even if the clatter of the 
machine disturbs our cloistered sensibilities and even if in 
the old-fashioned factory the workman must get his thrill 
from fooling the foreman or sneaking out early like a royster- 
ing schoolboy, instead of from pride in work, he is much 
better off with the machine and the power plant behind each 
move than he was when power meant strained back muscles. 

America's Supremacy in Machine Tools 

If there is one thing Europe thoroughly and frankly envies 
us Americans it is our machine tools. America leads the 
world in the use of jigs and fixtures, in multiple machining, 
and in the quantity of metal removed per machine revolution. 
In every country I visited, manufacturers complained to me 
because the existing rates of exchange made it impossible to 
buy our automatics, our milling machines, and our multiple 
drills. While the Olympia Machine Tool Exhibition in Lon- 
don brought out some splendid machines, some beautifully 

161 



1 62 AMERICA VS. EUROPE IN INDUSTRY 

finished pieces, and some wonderful examples of British 
sturdiness and dependability, even the British mechanical jour- 
nals themselves deplored the fact that there was very little 
to indicate that progress was being made toward rapid and 
cheap production. 

America, with wages from two to nine times as high as 
the rest of the world, has had to exert her inventive genius 
as has no other country. Out of this necessity — coupled with 
an ingenuity inherited from generations of pioneers who had 
to devise almost everything they used from the raw materials 
of the wilderness — has developed machinery whose ingenuity 
is little short of marvelous. When the flexibility of the human 
hand can be so counterfeited in steel and other lifeless mediums 
as has been done in the shoe machines, in machines that will 
not only box and weigh damp pulverized foods but will line 
the boxes with waxed paper and seal them, and in machines 
that will cut and wrap sticky caramels in thinnest tissue, the 
duplication of almost all hand labor is simply a matter of time 
and profitableness. 

Approach to the Machine Problem 

Any machine problem should be considered from the stand- 
point of economic values under existing or under obtainable 
conditions. It is obvious that money is wasted by the man 
who spends his time inventing non-refillable bottles in a prohi- 
bition country, or durable hats for ladies. It is none the less 
true that money is wasted upon machines that ingeniously 
perform an operation that could have been eliminated entirely 
had it received more thorough study. 

In attacking a material-handling problem — and all ma- 
chinery investment problems are the same in principle — the 
sequence of questions should be somewhat as follows : 

i. Is the operation necessary? 

2. What is the present cost of handling per unit handled? 



MACHINES 163 

3. What would the cost be under various other handling 
systems, taking into consideration : 

(a) Interest on the cost of the new plant. 

(b) Depreciation on the new plant, obsolescence included. 

(c) Upkeep of the new plant. 

(d) Power cost to operate the new plant. 

(e) Labor cost to operate the new plant. 

(f) Cost of interruptions in output with the new plant. 

(g) Flexibility of the new plant. 

(h) Increase in damage to material handled. 

4. Does the most profitable of all the new handling systems 
we have figured out offer the best investment possible for the 
money at this time — taking into consideration security and 
return on the investment? 

It does not pay to hunt snipe with a 16-inch gun nor ducks 
with a battleship. Neither does it pay to install a steam shovel 
to do a few hours work a week. Wheelbarrows are cheaper 
than tractors or conveyers on short hauls and with diversified 
and constantly shifting terminals. Pumps of high efficiency 
have been installed on sugar plantations only to be thrown 
out during the dry season and replaced by the old inefficient 
box-pumps when water, not efficiency, was vital to the survival 
of the crop. Pan-conveyers of low friction have been dis- 
carded in favor of conveyers requiring more power, where 
conditions were such that continuity of operation was more 
important than economy of horse-power. Repairs and inter- 
rupted output may eat up the profit on the whole installation. 
It isn't safe to embark in an investment in labor-saving ma- 
chinery unless the profitableness of the whole transaction is 
investigated just as carefully as is a new business venture. 
If this rule is disregarded — as it often is where salesman are 
glib and existing installations are attractive — the chance of 
loss is just about equal to the mortality rate of business ven- 
tures in general — something over 95 per cent. 



1 64 AMERICA VS. EUROPE IN INDUSTRY 

Small Tools and Special Tools 

Small tools, special tools, and methods which are quite 
familiar in American shops, are equally well known in some 
of the European plants. Although the automatic machine tool 
was an American invention, yet its design and application 
are well known in European plants. The types found include 
automatic screw machines, machines for other standard opera- 
tions, such as planing, drilling, and milling, and also machines 
for special operations, such as covering cables with lead. 

Machine Work in Modern French Factories 

At the Berliet automobile plant in France you can see the 
engine blocs carefully centered on the first machine, which 
drills two small holes in opposite corners. Thereafter time 
spent in centering is saved — because these two same small 
holes slip over pegs in every subsequent machine, immediately 
and accurately centering the bloc for each operation. You 
will see 4 cylinders drilled and ground at a time, 8 valve seats 
ground at once, and 68 holes drilled simultaneously. All 
machines are direct electric drive and the absence of the forest 
of overhead belts is refreshing in contrast with that of many 
American shops. All handling is done by compressed air 
hoists hung on trolleys or by conveyer — but that great plant 
in the outskirts of Lyons is equipped throughout with Amer- 
ican machine tools — those of Foote and Burt and others. 
American automatics — four to the operator, who is often a 
girl — are standard equipment throughout the plant. Even the 
blast furnaces were designed by a firm of American engineers. 

At the Renault plant you will find room after room of 
Potter and Johnson automatics, of Rochester and Cincinnati 
machines. In most cases you will find one man operating 
two machines. Multiple set-ups are common — a Cincinnati 
was planing a groove in ten crank cases all clamped to the 
bed in a row the day I was there. A little further on another 



MACHINES 165 

man was facing eight engine blocs — two faces at once — on an 
Ingersoll milling machine. Side frames for motor trucks are 
forged at one stroke on a hydraulic press. A brass-tube mill 
is turning out radiator tubes. Twelve-leaf springs are being 
tested on a special machine which bends them in reverse to 
an arc equal to the normal, then releases to within one inch 
of a straight line, and then measures the tension accurately. 

Soldering is done with gas irons, high speed riveting with 
compressed air "pistolets," a drilled plate ingeniously holding 
the rivet points to the fire, so that the head may not malform 
nor time be lost in fumbling. Women are doing acetylene- 
welding and trimming, operating machines, and driving elec- 
tric trucks. The overhead cranes are operated by women. 

Coal is unloaded from canal boats in the Seine by means 
of a clam-shell bucket operated by a man in a cage that runs 
on a trolley. An ingenious tank device consisting of a 
weighted float keeps the water pressure constant in a battery 
of hydraulic presses. 

On the other hand sand-blasting is done on revolving tables, 
but they are still using the unwieldy mask instead of enclosing 
the whole operation and watching it from the outside through 
the window as we do in America. 

Hand Work in France 

Progressive assembly exists at the Renault plant, although 
the rate of advance is regulated by the operators, who push 
the cars along the floor, instead of being regulated by the speed 
of a power-driven chain. Painting is still being done by hand 
with brushes, and multiple drills are rare. 

Hand-fitting is the rule — but an American motor mechanic, 
jetsam of the American Expeditionary Force, told me that 
he had taken down car after car and that the French engines 
were in better shape after ten, twelve, and even fifteen years 
of use than the average American car six months out of the 



l66 AMERICA VS. EUROPE IN INDUSTRY 

factory. "They use awful hard steel," he said, "and then 
they just polish and polish and polish until there ain't no 
friction left — and a cylinder fifteen years old ain't got as much 
knock as ourn has when they're just out of the works. But 
who in hell would drive a car fifteen years old in God's 
country?" — he finished reflectively. 

In the older French plants there is very little multiple 
machining, jigs and fixtures are fewer, and there is more 
handwork. Such shops very often handle very large pieces 
in special machines — wheels 25 and 30 feet in diameter are 
planed on a variety of boring mills, but light cuts and dry 
tools are the rule. 

Machine and Hand Work in Italy 

It was perhaps not fair to judge the output per man on 
machine tools in Italy as the plants were visited just before 
they were seized by the workmen and while the "slow work" 
strike was in progress. Under the circumstances the fact that 
one automatic to the operator and every department over- 
manned was the general rule could not fairly be taken as a 
normal state of affairs. The new plants, such as the Ansaldo's 
Victory factory, are very extensively equipped with American 
machine tools, from Plainfield, Cincinnati, etc., but neverthe- 
less, in general, handwork is more common than in France. 
The Italians have devised some very ingenious machines. 
Some of those used for covering cables with lead at the Pirelli 
plant are extraordinarily interesting. Some very large ma- 
chines are in use also — a 15,000-ton electro-hydraulic press, 
for instance, at an Ansaldo plant at Genoa. 

German Machines 

In Germany American machine tools are much less used 
than elsewhere in Europe. In the Loewe plant more than 
half the machines in use were manufactured in their own 



MACHINES 



167 



factory. In this plant the rule is two machines per operator 
on planing, milling, and chucking with four per operator on 
automatics. At the A. E. G. from three to four automatics 
per operator was the rule, although this was not lived up to 
during the labor troubles in the spring of 1920. Very efficient 
turret lathes, universal milling machines, automatic screw ma- 




Figure 19. Toolmaking Department at the Fiat 

chines, automatic pin and stud machines, lathes, and shapers 
are made in Germany. Some very ingenious machines have 
been worked out — an interesting development being the use 
of magnetic arms automatically feeding castings into machines. 

Machinery in England 

In England there are some two-spindle drills in the more 
modern factories. At one plant in Sheffield I found them 



1 68 AMERICA VS. EUROPE IN INDUSTRY 

setting up as many as eight pieces on one bed at a time, and 
they were using a revolving bed for facing castings which 
permitted two different sides to be faced without removal 
from the bed. There was one operator to every machine, 
however, which is again the rule in England. 

In a large Manchester plant a battery of eighty automatics 
averaged six automatics to an operator and helper, but this 
was very unusual. The superintendent told me he had run 
as high as ten automatics with the two operators on occasion. 
He further stated that in his department the work done per 
man was quite as much as that which was performed before 
the war. 

In the older plants in England there is an atmosphere of 
vastness and gloom which extends even to the machines. 
They are impressive, just as a huge damp cathedral is im- 
pressive. A New York hotel lobby, however, or a Los An- 
geles cafeteria — even if less dignified — is a much pleasanter 
place to haunt regularly. The machines are big and slow 
and the work is all done with due regard for precedent and 
the rights bestowed by Magna Charta. The amount of metal 
removed per cut is large in some cases, because the machines 
are built enormously strong, but progress is marked by dignity 
rather than by haste. The ultra-Tory establishment prefers 
to do a piece of work in four operations rather than in one, 
if that is the way their grandfathers did it. One such per- 
formance I witnessed in the case of an automatic spring, which 
was inserted in the machines four different times to perform 
operations all of which could easily have been performed dur- 
ing one insertion in a single machine. There were no multiple 
drills and no automatics and the man who showed me through 
told me he hated the word "scientific" and asked me if it were 
true that one party in America wanted Great Britain to recon- 
quer the United States so that it would again be possible to 
get a drink. 



MACHINES 169 

Mechanical Handling and Transportation Machinery 

Progress in mechanical handling has been more conserva- 
tive in Europe than in America. Until quite recently one of 
the most popular outdoor sports for more or less erudite globe- 
trotters was a tour of English and continental ports — especially 
Antwerp, Southampton, Bremen, and Hamburg — topped off 
with ribald laughter that New York should esteem herself a 
port at all, when it came to loading and unloading devices. 
New York proper still has a long road to travel, but the devel- 
opments in coal, ore, and grain handling machinery on the 
Great Lakes are so far in advance of anything seen abroad 
that when the engineers of the American Expeditionary Force 
got through reconstructing certain continental ports any num- 
ber of them were offered jobs by their late allies. One Amer- 
ican company since has sold cranes to Rouen, Cherbourg, Brest, 
Dunkirk, Rochefort, Bordeaux, Nantes, Havre, St. Nazaire, 
St. Louis du Rhone, Cette, Marseilles, and La Pallice in 
France alone. One of the largest companies in France has 
taken over the manufacture and sale of certain devices for 
picking up and dumping railroad cars bodily and for cranes 
which insert their grab buckets into the nethermost depths of 
a ship and bring out — in large chunks — whatever they find 
there. 

It has been estimated that ships can clear at Galveston and 
Seattle quicker than at any other ports in the world. With 
electric wharf cranes it is possible to unload the average ship 
loaded with cotton, sisal, steel billets, bagging, flour, and like 
commodities in less than twenty-four hours. Coaling ma- 
chines capable of handling 150 tons per hour can coal the 
largest ships in a day. Gravity conveyers and continuous 
elevators have handled as high as 1,500 miscellaneous boxes, 
bags, and barrels of from 50 to 150 pounds each per hour 
from the hold of a ship — even as fragile freight as bananas 
is being handled in this way at the American fruit ports. In 



170 AMERICA VS. EUROPE IN INDUSTRY 

one instance at Beaumont, 2,103 barrels of asphalt weighing 
over 1,000,000 pounds were unloaded in eight and a half hours 
at a cost of $25.16. Gantry and turret cranes, overhead 
trolleys, electric trucks with trailers, conveyers, and special 
devices created to load and unload specific bulk materials are, 
together with stacking machines, which pile the goods three 
or four times as high as it is practicable to stack them by 
hand, revolutionizing the ports of the world. Such port and 
terminal machinery will ultimately solve the dock labor ques- 
tion, which on account of its irregularity — twenty-four hours' 
work one day and then nothing to do for three days — and its 
severity, has made labor troubles at the docks — with conse- 
quent interruption to commerce — the rule, rather than the 
exception. Other countries are finding all this out and since — 
other factors being anything like equal — the port which can 
clear the ships quickest, gets the business, since profit in ocean 
transportation depends upon quick cargo turnover, one of 
the developments of the war is likely to be the installation 
of an immense quantity of labor-saving machinery at ports 
and terminals throughout the world. 

Already traveling cranes are quite as common, if not as 
powerful, in the modern factories of France, England, Italy, 
and Germany as in the United States. One of the Schneider 
plants has a 120-ton traveling crane. Those at the A. E. G. 
have already been described. In Italy light gantry cranes are 
used for piling lumber, being transferred from the tracks in 
one bay in the storage shed to the tracks running parallel in 
another, by an electrically operated transfer car. The steel 
and shipbuilding plants in Italy are especially well equipped 
with cranes. At one of the Ansaldo shipyards there is a 6-ton 
turret crane of 108-feet radius, and an 180-ton floating crane. 
At the Portovecchio docks of the Ilva plant there are as many 
as six Temperly unloading cranes. Other types of cranes 
found in Italy are tower cranes, locomotive cranes, overhead 



MACHINES 



171 



cranes, bridge cranes, and cantilever cranes, besides innumer- 
able hoists. 

The type of conveyer which Italy has developed perhaps 
to a greater extent than any other country is the telepher, or 
aerial rope cable-way. (See Figure 20.) This is a natural 
development in a country of perpendicular mountains and 




Figure 20. (a) Aerial Transport in Italy- 
Steel works at Piombino. Aerial line for transportation and distribution of the raw 

materials. 

rough gorges. . Alpine warfare, with its problems of trans- 
porting men and materials over an almost impossible terrain, 
was an added stimulus to an ingenuity developed by long 
experience. Perhaps the most spectacular installation of this 
sort is the coal cable-way which runs from the port of Savona 
up into the mountains to San Guiseppe — about twelve miles. 
The coal is unloaded from ships into bunkers by means of 
conveyers and elevators and the bunkers dump it into buckets 



172 



AMERICA VS. EUROPE IN INDUSTRY 



each holding a ton and a half. These buckets are drawn along 
the cable- way at the rate of 21 kilometers an hour and make 
the 12-mile trip in just about an hour. This is at a speed of 
1,140 feet a minute — so much in excess of the common Amer- 
ican practice in the mining districts — where the limit is about 
1,000 feet per minute — that I was at particular pains to check 




Figure 20. (b) Aerial Transport in Italy 
Detachable telepher for timber transport 

up the figures the day we visited the plant. Upon arrival at 
its destination the buckets are dumped into railroad cars or 
upon the ground. Telephers are used extensively in Italy 
for the transportation of timber from the slopes of the moun- 
tains, for carrying cement, and for the haulage of ore from 
the mines. They have also reached a very high development 
in Germany, extensive installations having taken place in the 
mountain regions of East Africa before the outbreak of 
the war. 



MACHINES 



173 



Electric magnet cranes of various types were found in all 
four countries. These are used principally to load scrap and 
pig into Martin or similar furnaces, the usual procedure being 
to gather the material with the magnet and drop it into the 
trays which the electric charging crane thrusts into the furnace 
doors. At the Breda plant in Milan on the day of our visit 
they were gathering the scrap with a magnet attached to a 




Figure 21. (a) Scrap-Handling at the A. E. G. 

The cast iron cover bears the name of the particular sort of scrap for which the 

chute is intended. 

locomotive crane, run on a track through the center of the 
yard. The scrap was released directly into the charging trays 
which rested on rails between the yard and the parallel charg- 
ing crane- way. This permitted the charging crane to engage 
the filled trays and to whirl around direct to the furnaces which 
were parallel to the line of rails. In a British plant the trays 
were taken from the yard on flat-cars and hauled to the 
charging crane by means of a small locomotive. 



174 



AMERICA VS. EUROPE IN INDUSTRY 



Scrap-Handling and Portable Car-Dumping Plants 

One of the most interesting mechanical installations is the 
scrap-handling plant of the A. E. G. The scrap is gathered 
up about the plant in small steel cars conveniently placed in 
various departments, each variety of scrap — "turnings," 
"nigger wool," etc. — being placed in a separate car. These 
cars are then hauled to the scrap plant and dumped down the 
proper chute, a cast iron cover bearing the name of the par- 




Figure 21. (b) Scrap-Handling at the A. E. G. 

From the chute the scrap passes into the proper bins, from which a magnet attached 
to a small overhead crane later transfers it to a railroad car. 



ticular sort of scrap for which the chute is intended first being 
lifted. (See Figure 21a.) The scrap then passes into the 
proper bins, from which a magnet attached to a small over- 
head crane later transfers it to a railroad car. .(See Figure 
2 ib.) The railroad car is then raised to the yard level by 
means of an elevator and hauled away. Certain sorts of 
scrap are baled by means of a magnet which feeds a hydraulic 
press. This same type of elevator is used for lowering box- 
cars to the level of the loading platform so that motors may 



MACHINES 175 

be run into the cars at platform level on small trucks. The 
plant is also equipped with devices for dumping railroad cars 
full of coal by tipping them on end, whereupon the coal passes 
to storage cellers, whence it is conveyed by pan-conveyers to 
the automatic stokers at the rate and quantity which may 
be required. 




Figure 22. (a) Portable Car-Dumping Plant 

General view of an Aumund tipple, older construction 

A comparatively recent development in Germany is the 
portable car-dumping plant. (See Figures 22a and b. ) This 
is built on a railroad truck and can be hauled to any part of 
the standard-gauge track and quickly set up in such a way 
that coal and dirt cars can be pushed up onto it and dumped 
at the side of the track. The method also permits building 
up immense piles of coal or soil by hauling the portable car- 
dumper upon rails laid on the pile. The rig is equipped also 
with grab buckets for loading from piles so that altogether 
it is a useful and ingenious storage device. (See Figures 
22c, d, and e.) 



176 



AMERICA VS. EUROPE IN INDUSTRY 



Use of Electricity 

The old European type of rolling-mill, with crowds of 
men rushing about in the intense heat and steam, rapidly is 
being replaced by the electrically operated mill where live rolls 
feed and receive the ingots as they pass between the rolls. I 
found them building electric mills of the most modern type 







Figure 22. (b) Portable Car-Dumping Plant 

Side-elevation of an Aumund tipple, latest construction 




6000- 



Figure 22. (c) Portable Car-Dumping Plant 
Loading and off-loading by means of portable tipple upon an extensive store yard 

at Le Creusot and at the Vickers plant in Sheffield. Most 
of the rolling-mills I saw in Italy were operated by hand, as 
is still the custom in most European plants of the older sort, 
except in Germany. 

Elevating trucks for transporting materials inside the fac- 
tory are in use in all the modern European factories. Electric 
tractors and trailers are also used extensively. Italy has been 
making use of the fact that her finest farm lands are close 
to the mountains by developing and using electric plows oper- 
ated by hydro-electric power taken from a trolley. 



MACHINES 



177 





178 AMERICA VS. EUROPE IN INDUSTRY 

Stimulants to Use of Machines Abroad 

Even though the fallacy of limited output benefiting the 
worker still survives in parts of Europe, the war everywhere 
advanced the use of the machine. Things had to be done 
which couldn't be done fast enough or which couldn't be done 
at all by hand. Germany was using machines and winning 
and it was a case of get fit or fail to survive. Furthermore, 
the use of women in industry stimulated the use of machinery 
and the adoption of makeshifts which would allow production 
to be maintained at an expenditure of less muscular effort. 
The flood of material and machines from America, together 
with experts to demonstrate their use, possessed the force of 
education by example as well as by precept. 

To illustrate this point the director of a certain Sheffield 
steel plant told me that he had bought an American vacuum 
cleaner a short time before. When his wife suggested to the 
maid that she make use of it, the girl gave notice. She said 
she "knew her place" — which meant her rights — and demanded 
the broom and dust pan which was her dower from generations 
of self-respecting slaveys. Her mistress finally gave the 
vacuum cleaner to her little girl to play with and the child 
amused herself by licking up the dirt with it in two-thirds of 
the room whenever the slavey enveloped herself in a cloud 
of dust in the time-honored manner in the other third. Finally 
this was too much for the self-respect of the proud representa- 
tive of the "serving clarss" and she informed her mistress 
that she might be induced to use the vacuum cleaner if properly 
approached. After she had begged sufficiently hard to estab- 
lish the right of existence also of the despised "upper class, " 
her mistress finally gave in. 

This is typical of what has been going on all over Europe. 
The old guard die hard. They will tell you how they had 
to teach America how to make guns. They will rise on their 
hind legs and paw the air whenever American methods or 



MACHINES 



179 



American progressiveness is mentioned, but American ma- 
chines are in almost every factory and port of the allies. The 
manufacturing nations must meet competition, make war, or 
go under. Modern warfare isn't a profitable game — for any- 
body — we have all found that out. Europe also awoke to the 
fact that she was falling behind in the use of machinery. She 
discovered that America had learned to pay higher wages and 
still produce enough more per man so that it was possible to 
undersell Europe. Argument and assertion were useless. 
Demonstrations of what American machines could do were 
taking place all over Europe. The lesson is now pretty well 
learned. With the return to normal, Europe rebuilt and 
equipped with American machine tools, will be an antagonist 
for world markets worthy of the best machines our ingenuity 
can devise. 

Durability of European Machines 

Practically all motors made abroad are set up, operated 
for some hours, and then completely disassembled. After the 
necessary corrections are made the engine is again built up 
and tested. In Paris the wonderfully designed motor-buses, 
after a certain period of use, are completely disassembled, 
every part is examined, and worn parts are discarded. The 
usable parts then become part of what is practically a new 
car — every part of which is sound. They figure this system 
is much better than our own of repairing one part after another 
as it breaks down, which makes a trip in a car more than three 
or four years old a gamble as to whether you will come home 
in the car or on foot. There is one bicycle company in Eng- 
land which even gives a perpetual guaranty, replacing not 
only defective parts but those which wear. American manu- 
facturers who expect to profit by the efficiency of American 
machine tools must remember that Europe is used to figuring 
the cost per year and that a machine which cost $2,000 and 



180 AMERICA VS. EUROPE IN INDUSTRY 

lasts eight years is only half as expensive as the one which 
costs $1,000 and only lasts two. Americans — with all their 
love of new paint and the latest style — are beginning to realize 
this same thing, as the avoidance of certain types of cars shows. 
Cost per year to the consumer is what ultimately determines 
the popularity of a product. 



CHAPTER VIII 

STANDARDIZATION 

Management Engineering in Early Days 

Less than two hundred years ago Benjamin Franklin, after 
long and anxious consideration of so momentous a step, made 
the journey from New York to Philadelphia. He traveled 
for more than seven days before he reached his new home. 
Today you can board the five o'clock train from New York 
any afternoon and find the club car filled with men in dinner 
jackets — making the same journey — simply to dine, spend the 
evening with friends in Philadelphia, and return home the 
same night. In Franklin's time the control of an industrial 
organization was a comparatively simple affair. At most the 
organization consisted of a dozen men — "the help" — all work- 
ing together with the master. They knew each other inti- 
mately and their families knew each other. The master and 
an apprentice or two brought in the raw material — perhaps 
on their backs, in the evening — each man in the establishment 
knew from long experience what he was to do, and they all 
went at it together. 

Under the circumstances it was a simple matter to plan 
and lay out the work. The master could think out such de- 
tails of the next day's task as were necessary between the time 
he brought home the raw material and the few minutes he 
set aside each evening for entering his cash income and outgo 
for the day in the primitive home-ruled account book which 
comprised his bookkeeping in its entirety. Employment man- 
agement consisted of hiring a new man every two or three 
years and welfare work was confined to the nursing of the 
sick, the women, including the wife of the master, taking 

181 



182 AMERICA VS. EUROPE IN INDUSTRY 

turn about. While at that time industrial administration was 
in an elementary state, the principles were identical with those 
which exist today, for human nature, basic materials, and 
terrestrial conditions in the domain of William Penn before 
the American Revolution and in the Pennsylvania of today — 
steel and coal center of the world — remain much the same. 

Franklin as an Industrial Engineer 

Benjamin Franklin himself, to all intents and purposes, 
was an industrial engineer. He applied the principles of 
scientific management to many industrial activities with which 
his work brought him in contact. He even worked out thir- 
teen principles of personal efficiency and marked himself daily 
upon the attainment of these standards. He made use of the 
scientific method in his approach to the problems of the day, 
instead of "learning by experience" and accepting the existent 
procedure — good, bad, and indifferent — as holy writ, never 
to be questioned. Upon one of his journeys to the forts on 
the frontier he time-studied two men cutting down pine trees 
and found that a 14-inch tree required six minutes to fell. 
He studied street-lamps and evolved a standard — with four 
panes and holes in the bottom for ventilation. He standard- 
ized street-cleaning — "piling the dust in the center so that the 
rain, as it fell, would wash it away in the gutters." He stand- 
ardized mud-hauling carts with "the bodies of the carts, not 
placed high upon wheels, but low upon sliders, with a lattice 
bottom, which being covered with straw will retain the mud 
thrown into it, and permit the water to drain from it, whereby 
it will become much lighter, water making the greatest part 
of the weight — these bodies of carts to be placed at convenient 
distances and the mud brought to them in wheelbarrows, they 
remaining where placed till the mud is drained and then horses 
brought to draw them away." He recommended "a set of 
experiments, first to determine the most proper form of the 



STANDARDIZATION 183 

hull for swift sailings 1 (of ships), next the best dimensions 
and properest place for the masts, then the form and quantity 
of sails and their position as the wind may be, and lastly the 
disposition of the lading. This is an age of experiments," 
he commented, "and I think a set accurately made and com- 
bined would be of great use." Franklin was not content with 
current opinion. Before reaching a decision he demanded 
the facts. What more can the searcher after truth in the 
laboratory or the administrator of the great industrial enter- 
prise demand today — except the power to put it over — once 
the right course is determined. 

Management Under Conditions of Today 

Even within the memory of our own veterans of industry 
the average factory was a small affair in which the owner 
worked with his men. Within the decade the manufacturing 
establishments of one of the busiest New England states aver- 
aged less than thirty employees each. The reason for exist- 
ence of most that is novel in our modern industrial organiza- 
tion — in executive control or in specialization — is to be found 
in the increase in size of our industrial units. Neither Ben- 
jamin Franklin with his three-man printing-shop nor W. L. 
Douglas when he operated his first factory with six "hands" 
needed double-entry bookkeeping, with auditors and comp- 
trollers; employment management, with interviewers and di- 
rectors of personnel; line organization, with foremen, super- 
intendents, and managers; staff organization, with specialists 
and research men; or scientific management with time-study 
experts and industrial engineers. 

But conditions have changed. Many of our vast corpora- 
tions are controlled from offices thousands of miles from the 



*It is interesting to note that this suggestion has recently been made use of by 
the British government,- which has worked out a tank for testing large models of 
ships, whose construction is contemplated, under the various weather conditions. 
These experiments have resulted in radical changes in existing notions of ship con- 
struction and in material economy of power. 



184 AMERICA VS. EUROPE IN INDUSTRY 

seat of their activities and are owned by some thousands of 
stockholders located all over the world, who are interested only 
in profits — large — frequent — and permanent. Such conditions 
are responsible for the creation of a machinery and a personnel 
which never existed when the owner worked at the same bench 
with his men. An exact organization with standard executive 
officers performing well-defined duties is just as natural an 
outgrowth of the industrial army which develops with the 
growth of one of our great corporations, as a standard mili- 
tary organization — generals, colonels, captains, and the like — 
is the outgrowth of the development from the Stone Age raid- 
ing^party of a dozen men led by the chieftain, to the European 
armies which existed when the Great War ended. 

The new science of administration is not a revolutionary 
cure-all, devised by smart alecks with more theories than 
common sense, as some of the veterans of the small shop seem 
to think. It is a natural evolution, born of the giant corpora- 
tion, the purpose of which is to maintain in operation under 
changed conditions the principles of good management which 
centuries of industry have demonstrated are necessary if busi- 
ness ventures are to prove successful. 

Standardized materials and standardized industrial acces- 
sories — from tools to buildings — are also the natural result 
of industrial evolution. It may have been economical for 
each Paleolithic warrior to select his own flint and to cut his 
own arrow shaft — a mistake in judgment on his part meant 
only the loss of his own life. Today it would be neither eco- 
nomical nor safe for each soldier in an army of 5,000,000 to 
build his own weapons nor for each workman to fashion steel 
rails or ship-plates — upon whose perfection the lives of thou- 
sands depend — as his individual fancy directed. Industry has 
become too complicated for one man to understand all of even 
a single branch. It is a case for specialists and for research 
laboratories. 



STANDARDIZATION 185 

Meaning of "Standardization" 

The term "standardization" as applied to industry pertains 
to material, to labor, or to either or both of these elements 
combined with accessories, such as tools and the like, which 
in effect results in the development of standard methods of 
procedure involving all three elements. These may be tabu- 
lated as : 

1. Standardized materials 

2. Standardized labor 

3. Standardized accessories 

4. Standardized procedure 

1. Standardized Materials 

Under "standardized materials" we have such things as 
laboratory-tested steels, analyzed coals, clays, cement mate- 
rials — everything in fact whose exact composition must be 
known in order that building or manufacture may be so con- 
ducted that the final result may be predicted before the work 
is begun. Originally such tests were principally confined to a 
determination of the composition of raw materials. Of late the 
tendency has been more and more toward a determination of 
the physical qualities also. It has been found that a chemical 
analysis of a steel is worth more when the tensile strength or 
hardness is known also, and that it is often more desirable to 
know what a fire-brick will do under load conditions, when laid 
up in the wall of a steel furnace and heated to 2,500 degrees, 
than it is to know exactly how much silica it contains. 

The extra time required to machine unusually hard cast- 
ings is often sufficient to upset the manufacturing program for 
the day, to say nothing of established piece rates. Castings 
that develop defects in the last process of manufacture after 
an expenditure of labor through previous departments not 
only cause the loss of such labor but often upset the work 
planned in the rest of the shop and disappoint — perhaps alien- 



1 86 AMERICA VS. EUROPE IN INDUSTRY 

ate and lose — the customer who expects shipment on a certain 
date. Improperly cured lumber may result in heavy manufac- 
turing losses. In the continuous-production type of factory — 
cement plants, paper and flour mills, brick plants, and the 
like — a defect in a raw material cast into the original batch 
may send the whole output over the dump, as surely as salt 
mistaken for sugar will ruin good flour, butter, and eggs — 
to say nothing of carefully expended labor — when the house- 
wife makes a similar error. 

2. Standardized Labor 

The "standardization of labor" follows two main lines : 

(a) The determination of the amount of work required 
to perform a given operation, with standard tools, etc., upon 
standard materials. So far standardization of this kind has 
been confined to determining the amount of time required 
for the average worker to perform a given task 2 rather than 
the expenditure of foot-pounds of energy per hour. 

(b) The determination of just what qualities, training, 
and affiliations shall fit a man to perform certain work. 
The standpoints from which this phase of labor standardization 
has been attacked are as remote from each other as the poles 
of the earth. The most important are as follows : 

(i) The determination of the qualities which fit the man 
to the job range all the way from the German psycho-technical 
tests, the American army tests, psycho-analysis and character 
analysis, to phrenology and soothsaying. 

(2) The training of workmen concerns the direction of 
apprenticeship courses, of vestibule schools for training new 
arrivals at the plant, of vocational training schools, of grade 
schools, and of universities. The future of industry depends 
upon this training. 

(3) The determination of just what affiliations shall fit a 



2 See chapter on rate-setting for further elaboration. 



STANDARDIZATION 187 

man to do a certain piece of work is the concern of the trade 
unions who have been giving considerable attention to the 
matter, not so much for the purpose of increasing the effi- 
ciency of industry as to protect themselves against the use of 
unskilled labor at low wages on work that they feel they 
are entitled to. Some of the rulings of a certain board of 
adjustment illustrate the lengths to which this may be carried. 

Formerly an exhaust nozzle tip (the thing that makes a 
locomotive puff) was changed by any machinist or boiler- 
maker whom the foreman picked up about the roundhouse 
and assigned to the job. This man unbolted the door in the 
front of the boiler, uncovered the manhole in the spark-arrest- 
ing netting, disconnected the blower pipe, removed the nozzle, 
welded the prongs, replaced the nozzle tip, connected the blower 
pipe, replaced the manhole cover, and closed the smoke-box 
door — which finished the job. 

Now, under the rules, the gang foreman notifies each of 
four craftsmen individually of the operations required of him. 
The boiler-maker with his helper opens the smoke-box door 
and removes the manhole cover in the netting. The pipe- 
fitter and his helper disconnect the blower pipe. The machin- 
ist and his helper remove the nozzle. The acetylene-welder 
and his helper weld the prongs. Then the machinist and his 
helper replace the tip, and the pipe-fitter and his helper connect 
the blower pipe, and, finally and lastly, the boiler-maker and 
his helper close the smoke-box door. 

Imagine this solemn procession to and from the ailing 
engine, the time wasted on the way, and the waiting for the 
previous pair to finish. They carried the same system to excess 
in India — where eight servants are required to do the work 
of two — the man who cleans the house cannot work in the 
garden or the man who cooks cannot open the door for 
guests. It is called the "caste system" and it made native 
India what she is today — a land of poverty, ignorance, and 



^8 AMERICA VS. EUROPE IN INDUSTRY 

starvation. The future of industrial America will depend upon 
our retention of the real democracy of our forefathers, upon 
the avoidance of caste, of class distinction and of class hatred, 
and of all effort to do by legislation that which can be done 
only by hard work. The only way to have things is to produce 
them. Intelligent trade unionists realize this fact and co- 
operate to that end. 

3. Standardized Accessories 

''•Standardized accessories" cover an almost unlimited 
range. Under this head would come : 

(a) Standardization of Machines. Standardized ma- 
chines may be defined as machines capable of making a maxi- 
mum cut, with standardized tools 3 of standardized steel on 
standardized materials without developing structural weak- 
nesses which delay output or result in excessive charges for 
maintenance. Under the head of "standardization of ma- 
chines" is included also the reduction of all machines in a 
factory to a common denominator as regards machine acces- 
sories, so that within reasonable ranges all tool-holding devices, 
jigs, fixtures, etc., are interchangeable — which saves invest- 
ment in such devices and in tools also. It furthermore includes 
the equipment of machines to cover a wider range of work, so 
that work may be done on any one of several machines instead 
of having to wait for a particular machine, with attendant 
congestion and delay. 

(b) The standardization of transmission mediums, such 
as belting — the determination of the width, thickness, material, 
tension, drive length, etc., that will give the best results under 
given conditions. This results not only in less breakdowns — 
with attendant delay, loss of output, and repair expense — but 
in a lower belt cost per year since the life of an improperly 
fitted belt is very short. 



3 See Taylor's "Art of Cutting Metals," etc. 



STANDARDIZATION ^9 

(c) The standardization of oils, greases, and lubricants 
of all sorts and their containers. 

(d) The standardization of trucks, trailers, conveyers, 
and all transportation machinery so that parts are, in so far as 
possible, interchangeable. 

(e) The standardization of drawings, blue-prints, gauges, 
printed forms, symbols for marking tools and machines and 
for use in clerical work (mnemonic symbols), and all similar 
aids to production. 

4. Standardized Procedure 

''Standardized procedure" is a combination of all that has 
gone before. It may be developed in the form of blue-printed 
instruction cards such as fill the library at the Tabor Manufac- 
turing Company and record in detail the procedure for every 
piece of work performed for years — the elemental operations, 
their sequence, and the time required for each of them. Hav- 
ing this information available at a moment's notice prevents 
endless rehashing and argument as to methods of procedure 
that in so many plants have already been settled a hundred 
times, but concerning which no one remembers anything 
definite. Such instruction cards preserve a record also of the 
laboratory experiment — a piece of research work too expen- 
sive to do before every job but which pays for itself hundreds 
of times over if ably and scientifically conducted at first. The 
instruction card furthermore in the shortest possible time 
educates the workman to the best method of doing the job 
as quickly as possible. 

Standard procedure is usually developed by the industrial 
engineering department of an organization — whether it be 
a bank, 4 a factory or a commercial concern — acting in a staff 
capacity to the management. Once the procedure is approved 



4 The larger banks such as the federal reserve bank, the National City Bank of 
New York, etc., have maintained such departments for years. 



190 



AMERICA VS. EUROPE IN INDUSTRY 



by the management it is issued over the signature of the chief 
executive in the form of written "standard practice instruc- 
tions," to all executives whose departments it affects, super- 
seding all previous orders in much the same manner in which 
new laws passed by a government supersede and void such 
portions of previous laws as are in conflict with the new legis- 
lation. In this way, in loose-leaf binders furnished each 
executive, is built up a written code covering the method of 
doing business, which previous experience, research, and 
conference have shown is productive of the best results. 
Inasmuch as the industrial engineering department — it is 
assumed — has consulted every person concerned, has studied 
existing procedure in detail, and has determined in just what 
way the new ruling will affect all concerned, before making 
its recommendation, the result is a joint affair and the confu- 
sion that often results from autocratic and ill-considered orders 
is avoided. Furthermore the time which the chief executive 
would expend under the usual method of procedure in inter- 
viewing various department heads as to details, in order to 
make sure that he has all the facts, is released for more 
important work. And finally, since the law of the organiza- 
tion is in writing, there is no excuse for any executive or 
any workman being unfamiliar with his duties. 

In working out standard practice instructions it is, of 
course, necessary to exercise discrimination. Standard prac- 
tice covering the detail as to just how a man should walk to 
his offices each morning, where he should place each foot, the 
special motions he should adopt in case of rain, hail, snow, 
and the like, would be as absurd as David Parry's 5 account of 
the Socialistic Empire, in which inspectors forced everyone 
to laugh every twenty minutes for the good of their health. 
Common sense is as necessary in working out standard prac- 
tice as in any other business activity. 

B Farry, David M., The Scarlet Empire. 



STANDARDIZATION 



191 



Use of Terms to Denote Mass Production 

The term ''standardized" is also used extensively abroad 
to describe the manufacture in immense quantities of one type 
of product — mass production in other words. The manufac- 
ture of Ford automobiles would be referred to as "the manu- 
facture of standardized motor cars," for instance. What 
is usually meant, however, is the Continuous Production Sys- 
tem of manufacture as against the Job Production System — 
the substitution of the wholesale manufacture of ready-made 
clothes by thousands for individual custom tailoring. It is 
what has taken place in most of our automobile plants. 
Formerly in a particular plant whose growth I have watched 
a certain number of cars of each sort were assigned to the 
plant each month and each part was very carefully planned 
and dispatched from one machine to another in order that 
a machine might be used first for one sort of work and then 
set up for something of an entirely different nature. This 
elaborate planning mechanism has been supplanted by a stand- 
ing order for so many parts per day, each manufactured on a 
machine which specialized on this part alone, and all follow- 
ing by regular channels to the various assembly points where 
they united again and again until finally, in the form of the 
finished cars, the stream flowed out of the plant. 

Standard Unit Assembly 

This requires what is known as "standard unit assembly." 
Under this system, instead of assembling the whole machine, 
piece by piece, the various unit parts are assembled first into 
groups, as it were, and then these groups are later united to 
form larger groups or the finished machine. Thus the engine 
of a motor-car will be assembled complete, ready to drop into 
the car; the rear axle will be similarly assembled; and so 
forth. The advantages of standard unit assembly are : 

I. The work of assembly can be more accurately controlled; 



192 



AMERICA VS. EUROPE IN INDUSTRY 



detailed time study is made possible through the reduction of 
the process from a complicated operation to a number of 
simple operations which are more easily handled. 

2. The interchange of assembled units from one machine 
to another is made possible, thus increasing the flexibility of 
manufacture. 

3. Quick delivery is made possible through having a great 
deal of the work completed in the stock. 

4. Storage of more weight in less room is possible than 
is the case when completed machines are stored. Machines 
may be shipped in the "knocked down" state and assembled 
at the point of use. 

5. The operation of the shop on stock work becomes pos- 
sible. In this way less money is tied up than is the case where 
parts are made which are good only for a single machine 
which may not be ordered in years. 

6. The development of specialists is favored resulting in 
reducing the cost and increasing the quality. 

7. Inspection is simplified and thereby cheapened. 

Progressive Machining 

Progressive Machining is another development of the 
standardization attendant upon the metamorphosis from the 
job production into the continuous production shop. The old 
machine-shop, working largely on special orders, grouped 
its machines by kinds. All the drill presses stood together, 
all the milling machines were in one place, and all the lathes 
occupied a space by themselves. This was all right when there 
were only two or three of each kind of machine in a plant. 
As plants grew, however, and contained hundreds of each kind 
of machine, separate departments — often located a good many 
feet apart — were necessary. This meant that when a number 
of operations were necessary on a piece it had to be carried 
from one department to another — perhaps several times over 



STANDARDIZATION 193 

the same ground, with attendant trucking expense. It also 
meant delay, in tracing the piece when lost ; congestion, when 
too many pieces arrived all at once in a department; loafing, 
when not enough pieces arrived to keep the working force 
busy; unnecessary stock-chasing expense; and many other 
difficulties, which added to the cost of production. 

To get away from this sort of thing progressive machining 
is being substituted wherever possible. As soon as a part can 
be standardized — and that is often possible even in a plant 
working principally on special orders — the number of ma- 
chines required to perform the various operations, and the 
length of time each machine must be operated may be deter- 
mined from the amount of work to be done. Thus, if the 
first operation were drilling and a hundred pieces required 
an hour to go through a single drill press, the second opera- 
tion — punching — which required half an hour for the hundred 
pieces, and the third — slotting — which required two hours per 
hundred, the number and sort of machines would be determined 
by the output of the fastest and enough of the others would be 
set up in series to keep the fastest one busy and the output of 
the department constant, thus : 

Operation Time per 100 Pi ?J es No. Machines Output 

^ per Hour Required per Hour 

1. Drill 1 hr. 100 2 200 

2. Punch y 2 hr. 200 I 200 

3. Slot 2 hr. 50 4 200 

This arrangement turns the department into a continuous 
production shop, which operates like a coffee-mill or a sausage 
machine, turning out the finished product at one end as fast 
as the raw material is fed into the other. In order to work 
successfully, standard times for each operation must be deter- ■ 
mined, standard materials and tools must be provided, and 
breakdowns of individual machines guarded against by making 
repairs before the breakdowns occur. Otherwise one group of 



194 



AMERICA VS. EUROPE IN INDUSTRY 



machines will delay another and the continuity of operation 
will be interrupted. 



Progressive Assembly 

The same principle is applicable to assembly and similar 
work and has been employed extensively in connection with 
chain, belt, and car assembly and fabrication. This Progres- 




Figure 23. (a) Progressive Manufacture in America 

Motor assembly 

sive Assembly differs from ordinary manufacturing methods 
in that each unit under fabrication is moved at a fixed speed 
by mechanical means past given points where particular oper- 
ations must be performed. The underlying labor principle is 
an old one and in an elementary way has been in use for a 
very long time in bucket fire brigades, loading ships, and similar 
manual operations, where speed was essential and could be best 
secured by arranging the workers in lines, so that the weaken- 
ing of a single unit would be at once observable in the stoppage 
of the entire flow. Later it was used in brickmaking and in 



STANDARDIZATION 



195 



similar continuous production systems of machine-manufac- 
ture, where the failure of the workmen to remove the finished 
or semifinished product from the machines — whose speed and 
whose supply of raw material were fixed — resulted in instant 
and evident congestion. In a way, it is a method of forcing 
the work onto the men by mechanical means, and unless judg- 
ment and humanity are exercised in regulating the speed and 




Figure 23. (b) Progressive Manufacture in America 
Final assembly 

in assigning the operators — which can be done fairly only by 
the use of the stop-watch — is not only as harsh as the tread- 
mill but results in some men on the line loafing while others 
are overworked. 6 

The chain assembly in automobile plants — first given pub- 
licity in connection with the Ford plant — is perhaps the most 
spectacular application of progressive assembly. (See Figures 
23a and b. ) There in the final assembly division the units 
already individually assembled elsewhere, under the standard 



e See chapter on rate-setting. 



j 9 6 AMERICA VS. EUROPE IN INDUSTRY 

unit assembly system, are combined to make the complete car. 
At the start of the chain conveyer in this division a front-axle 
unit, a rear-axle unit, and a frame unit are combined and the 
chain conveyer, moving at a fixed speed, engages them and 
thereafter regulates the rapidity of their progress. The gaso- 
line tank, containing one gallon of gasoline, is added, as are 
the hand-brake control lever, gasoline feed pipe, fenders, motor, 
dash unit (including steering-gear coil, horn, and wiring), 
exhaust pipe, muffler, wheels with tires inflated to proper pres- 
sure, and radiator. The engine is then started, the body is 
swung into position and fastened, and the car, now complete, 
moves away under its own power. 

Before this system was installed 1,100 employees were 
required in the engine unit assembly division to build 1,000 
motor engines a day. After it was installed 1,400 men built 
3,000. The pressure under which the men work is terrific, 
but short hours and education in hygienic methods of living 
make the crowd that pours from the doors of the Ford plant 
each evening, as I can attest from personal observation, as 
healthy and happy an army as I have ever seen issue from a 
factory anywhere in the world. 

In so gigantic a case of standardization as this, in a factory 
turning out over 1,225,000 cars a year and employing over 
50,000 men, for the most part engaged in progressive machin- 
ing or in progressive assembly, where each unit assembly chain 
conveyer must feed its quota of parts into the main stream 
of the final assembly, where congestion and chaos would fol- 
low imperfect synchronization, the amount of standardization 
of materials, tools, accessories, and labor is almost incon- 
ceivable. The first cost has been terrific but the result is the 
production of a dependable automobile at a cost which is the 
despair of competitors throughout the world. 

The principle of progressive assembly and fabrication 7 is 



7 Together sometimes called "progressive manufacturing." 



STANDARDIZATION igy 

by no means confined to the use of chain conveyers. Besides 
the regulation of the speed of production by regulating the 
speed of the machine, there are numerous intermediate applica- 
tions, such as the use of conveyer belts, along which operators 
perform small assembly tasks or fill packages, the use of cir- 
cular belts and tables on similar jobs, the use of conveyers 
for casting automobile engines, and the like. The guiding 
principle is a power-regulated rate of production. 

Progressive assembly of a sort is also in use in the plant 
through which the product flows from department to depart- 
ment over a regular course. In this case, however, the speed 
of the stream is regulated by the volume of flow at its narrow- 
est point. When something goes wrong in a department the 
whole stream is dammed up and there is a famine below 
and a flood area above the point of congestion. 

Summary 

To recapitulate, the term "standardization," as applied 
to modern industry, covers : 

i. Materials — laboratory examination insuring a con- 
stant quality. 

2. Labor — the determination of : 

(a) The amount required for each job — deter- 
- mined by analytical time study. 

(b) The quality required for each job — determined : 

(i) By tests of experience and potential 
ability. 

(2) By training — developing potential abil- 

ity. 

(3) In accordance with affiliation, in trade 

unions, etc. 

3. Accessories — conditions surrounding the work : 

(a) Machines. 

(b) Transmission. 



198 



AMERICA VS. EUROPE IN INDUSTRY 




STANDARDIZATION 199 

(c) Lubricants. 

(d) Transport. 

(e) Miscellaneous. 
4. Procedure : 

(a) Standard instructions. 

(b) Progressive manufacturing: 

( 1 ) Standard unit assembly. 

(2) Progressive machining. 

(3) Progressive assembly. 

Standardization of Materials Abroad 

Standardized materials have become necessary to the plants 
using steel and other materials whose quality is essential. In 
consequence the more modern plants abroad are equipped with 
laboratories, just as they are in America. The laboratories of 
the Pennsylvania Railroad Company, of the American Rolling 
Mill Company, the General Electric Company, the Ford Com- 
pany, and the Eastman Kodak Company, find their counter- 
parts in those of the Krupps, the A. E. G., and the Loewe 
companies in Germany; of Hadfields, the Metropolitan-Vick- 
ers, the Brown-Firth, and Lever companies in England; of 
the Ansaldo, Fiat, S. I. P. E., Biak, Pirelli, and certain food 
product companies in Italy; and at the Schneider, Berliet, and 
Renault plants in France. 

In England a Department of Scientific and Industrial 
Research has been established by the government, under 
treasury grant. The new electrical syndicate in Italy voted 
a million lire for research work. At one German plant I visited 
all raw materials were examined : metals were given chemical 
and physical tests; castings were tested for hardness; and all 
coal, coke, oil, and other supplies were analyzed before the 
railroad cars were unloaded. This laboratory did work also 
for smaller plants in the vicinity that were not equipped with 
laboratories. Pyrometers and sometimes pyrometrical cones 



20O AMERICA VS. EUROPE IN INDUSTRY 

are used for metallurgical work and for heat-treating in most 
of the plants visited. 

Private Research Departments in England 

At a very large and modern plant in Manchester all 
standardization work is under the direction of a research 
department which has charge not only of what is commonly 
known as "research work" and the tests of raw materials 
but takes care of the work usually done by American industrial 
engineering departments. This department analyzes methods 
of manufacture; plans the progress of work through the plant; 
sets delivery dates on new work; investigates difficulties aris- 
ing in the manufacturing organization ; controls technical pro- 
cesses in manufacture; develops new tools, appliances, and 
methods; improves and standardizes those existing; and devel- 
ops methods for the treatment of factory waste and the utiliza- 
tion of by-products. It furthermore engages in "physiological 
and psychological investigations relating to vocational selec- 
tion and for determining the most efficient means of employing 
human services." It is also in charge of educational and wel- 
fare work, and performs various other staff duties — all of 
which can economically and logically be grouped under a 
single head. 

At another plant in England, run strictly according to the 
best principles of scientific management, there are three re- 
search departments. One is under the purchasing and stores 
department and in its chemical, physical, and heat-treating 
laboratories determines the suitability of all raw materials and 
supplies as they are received. Another is under the direction 
of the factory manager and in it, new machines are tried out 
and tests are made to determine their capabilities, limitations, 
and most effective use. The possession of this laboratory also 
enables the factory manager to work out solutions to factory 
problems and to originate new processes. The third laboratory 



STANDARDIZATION 201 

is attached to the sales department and in it is done research 
work designed to increase the sales field of the company. New 
ideas are tried out and new products are originated. 

England is well aware of the value of research, Germany 
having furnished a striking example of the value of the indus- 
trial laboratory, and an effort is being made to tie up the 
laboratories of the technical schools and universities with 
industry and with the government laboratories. Especial at- 
tention is being given to the elimination of unnecessary fatigue 
in industry both by the government and in the universities — 
by Dr. A. F. Stanley Kent, head of the Department of Indust- 
rial Engineering, College of Technology, Manchester, by Drs. 
Myers and Muscio at Cambridge, and by certain others who 
realize that more efficient production means more output with 
less wear and tear upon the producer. 

Standardization of Accessories in Europe 

Labor standardization will be discussed in the chapters on 
rate-setting, personnel, 8 and education. The standardization of 
accessories has been to some extent discussed in the chapter 
on machines. High-speed steel is generally used abroad, as are 
American machine tools. Tool-grinding is done in separate 
departments according to established standards at certain of 
the newer French plants and at the German plants. The stand- 
ardization of transmission is being solved quite largely by the 
introduction of the direct electric drive in most of the new 
plants of Europe. In Germany profusely illustrated printed 
instructions are issued, covering methods of belt-lacing and 
the like. At Le Creusot all tools are not only standardized 
but special tests are made of all tool steel and castings used 
in order to satisfy the men that they can accomplish the stand- 
ard tasks in the time set. In these tests a simple tool of stand- 



inasmuch as the quality of the labor is affected by the health and happiness of 
the workman all welfare work naturally enters here. 



202 AMERICA VS. EUROPE IN INDUSTRY 

ard shape is made of each lot of tool steel and a test piece of 
a certain size and shape is set in the machine, where the tool 
is brought in contact with it at a given pressure for a given 
length of time. If the test piece is not reduced to a certain 
size in that time the tool steel is rejected. This is a test which 
all the workmen can see and understand and when it is over 
they know they are working under standardized conditions 
as regards tools and materials and that failure to attain stand- 
ard output is due to something else. This system has been in 
use over twenty-six years. 

Standardized Accessories in Germany 

Germany is really the home of standardized accessories. 
They carry this passion for standardization and orderliness 
to an extreme impossible elsewhere. On Sunday, if the day 
be hot, you will see many venerable gentlemen pottering about 
in the Thiergarten with their hats hung on hooks attached to 
the front of their vests. The fittings in the compartments of 
the sleeping-cars are a marvel of ingenuity from the windproof 
ash trays to the bottle-holders which prevent loss of valuable 
beverage in case of a sudden stop. The rooms in the Adlon 
Hotel in Berlin are more scientifically designed for comfort, 
use, beauty, and service than anything we have in America : 
built-in wardrobes that really hold your clothes ; double doors 
to keep the room quiet; curtains that shut out the light but 
admit the air; a desk that is really serviceable; a couch that 
is comfortable; the latest plumbing, mirrors, and lights where 
you can use them to the best advantage ; a waiter in your room 
for your order one minute after you ring the bell and break- 
fast six minutes later; phone attendants and porters who will 
act as interpreters. Moreover, a universal courtesy prevails — 
in spite of the fact that tips are forbidden — that is just as 
much an asset as the marb 1 e lobby or the garden with its foun- 
tain, its gay umbrellas, and its flowers. 



STANDARDIZATION 



203 




Figure 25. Standardized Fire Station 

In German factories you will find standardized fire stations 
— a big red F painted on the wall in a black circle where all 
may see. Below is an axe, a box of sand, two pails of water, 
a small chemical engine, a general alarm signal, and printed 
instructions. (See Figure 25.) Near all the traveling cranes 
you will find a metal stand equipped with hooks. On each 
hook is a rope of standard length and thickness. There are 
printed instructions — profusely illustrated — showing just how 



204 AMERICA VS. EUROPE IN INDUSTRY 

knots should be tied and which rope should be used for each 
purpose. 

Out in the yard you will find all trackage and all turntables 
standardized. Little booklets are issued showing just how 
the track and turntables must be operated in the interest of 
safety and efficiency. Standard methods of setting up ma- 
chines, in which the comfort of the workers is made a major 
factor, have been developed, and illustrated booklets record 
the standard for the benefit of those who will make future 
installations. 

Standard instructions as to the best and safest method of 
conducting various industrial operations are issued to workers 
in printed form by certain of the larger companies in Germany. 
These are more in the form of general instructions as to how to 
operate a certain machine or to do certain work — often with 
the accent on the verboten — than a detailed list of unit opera- 
tions in sequence with standard times attached — which is what 
we mean by an instruction card in America. 

Standardized Accessories in France 

In France instruction cards have reached their highest devel- 
opment. Those at the Schneider plants I found to be quite 
the equal of anything we have developed in this country. Such 
cards have been in use in the shipyards at St. Nazaire for 
more than five years and are in use at Chlon and at various 
other industrial plants. At Le Creusot there are over 100,000 
cards on file covering in detail the operations required to build 
a locomotive — machining, steamhammer work, heat-treating, 
forging, etc. The Paris motor-omnibus plant has had instruc- 
tion cards in use for years. 

The analytical French mind seems naturally attracted to 
time study and the recording of results for future use. Every 
new machine which enters the French plants which have defi- 
nitely adopted scientific management is carefully studied and 



STANDARDIZATION 205 

a reference book is compiled showing of what it is capable 
and how it should be operated. All this information, secured 
both from the manufacturers of the machine, by test, and by 
scientifically conducted experiment, is carefully preserved in 
a library for future use. While the preparation of this book 
of instructions may cost something, the expense is nothing as 
compared with the cost of performing the same experiment 
time after time in the various shops and of operating the 
machine below capacity for years, simply because its capacity 
has not been determined. 

One of the most interesting developments of standard in- 
structions has taken place in connection with the Gobelin tap- 
estry works in Paris — a state-owned plant which began opera- 
tion in 1662. The tapestries, each specimen of which is worth 
thousands of dollars, are woven in accordance with designs 
by famous artists. In carrying out the weaving the designs 
are analyzed and written instructions prepared showing just 
how many stitches of each color are to be taken to reproduce 
the picture. It is a combination of co-operation between artist, 
man of science, and workman which is unique. 

In England, in spite of certain notable exceptions, very 
little standardization work of this sort has been done, partly 
on account of the natural individualism of the British mind 
and partly because of the attitude of suspicion on the part of 
both trade unionists and the older type of employer toward 
innovations. Some of the Italian plants have what they call 
instruction cards, but those I saw were extremely elementary. 

Progressive Machining and Assembly Abroad 

Progressive machining is as yet fairly rare in Europe. In 
France they are doing it in the locomotive plant at Le Creusot 
and at the Berliet plant near Lyon. Mass production of shells 
taught them the lesson during the war and the grouping of 
machines in such a way as to turn the job production shop 



2o6 



AMERICA VS, EUROPE IN INDUSTRY 



into a series of continuous production shops is under way. 
Several plants have adopted the plan in England and it is in 
use in Germany. 

Progressive assembly, with the chain conveyer, has been 
introduced into several British plants in much the same form 
as in some of the Detroit automobile plants. They were just 
starting such an installation in one of the French motor plants 
at the time of my visit. 




Figure 26. Progressive Assembly in a French Motor Plant 

At another plant, however, while they thought they had 
this system, progress was actually determined by the sweet 
will of the workmen who pushed the cars along on their own 
wheels at any rate they pleased. Much the same system was 
in use in Germany — the work, since it is done as it moves on 
cars, might be called "progressive assembly" but the speed of 
progression was regulated by means other than mechanical. 

At one German plant certain machines were so arranged 
as to regulate the work speed. One, I remember particularly, 
was a chain conveyer bearing armatures which had to be 
painted before they reached a certain spot. A gluing machine 



STANDARDIZATION 207 

operated in a British paper-box factory might have been 
operated on this principle. The machine was set up at the 
head of a rubber conveyer belt about 50 feet long which bore 
the box parts of various sorts, wet with glue, to each of the 
eight or ten girls on each side, working at tables set at right 
angles to the belt. This arrangement placed the speed of the 
work to some extent in the hands of the woman operating the 
gluing machine who, with all the workers in sight, could feed 
any particular girl parts as fast as she thought she should 
take them. 

At another English plant the work was progressive from 
department to department, but, although stores of assembled 
parts — unit assembly — were present where needed, the rate 
of progress from department depended upon the weakest de- 
partment, just as the speed with which water runs out of a 
bottle depends upon the size of the neck of the bottle. 

Advantages of Standardization 

Standardization is more feared by the loose thinker whose 
industrial experience is confined to a perusal of the radical 
press than almost any other phase of industry. "What!" 
he screams, "Are you going to murder personal initiative and 
reduce men to the dead level of machines by prescribing their 
every action?" A vice is a virtue carried to excess. Stand- 
ardization applied with common sense is no more a curtailment 
of personal freedom than are laws against murder, theft, and 
assault. Standardization is education, it is insurance against 
accident, and it eliminates unnecessary fatigue. It stimulates 
initiative and research just as the record of what has been dis- 
covered in chemistry and of how to reproduce each experiment 
step by step, has stimulated research in chemistry. You cer- 
tainly wouldn't burn all recorded scientific research in order 
to enable the coming generation to exercise their initiative. 

The study of what has gone before combined with the 



208 AMERICA VS. EUROPE IN INDUSTRY 

systematic research of an Edison is what makes for progress — 
not the haphazard dreams of a crank inventor. What has 
been standardized remains standard only until a better way 
is found. Reduction of standards to writing insures the 
performance of the work in the one best way known. When 
a better way is found the law is amended. Meantime its codi- 
fication makes for order, co-operation, and safety. Suppose 
during the Great War every operator of a big gun had been 
allowed to shoot when and where he pleased. Individualism 
instead of co-operation is just as dangerous in an industrial 
army. 

It has been said that the greatest obstacle to the progress 
of the human race has been that each generation must learn 
again, by bitter experience, the lessons its fathers have already 
learned. Each generation must learn the effect of dissipation. 
Each generation must have its war. Each generation must 
make the same political mistakes. What is true in life has been 
true in industry. The nation or the industry which conducts 
intelligent systematic research into all the factors of its activity, 
which records and disseminates the results of such research 
and which is so organized as to insure performance in accord- 
ance with such facts — until something better is discovered — 
is not dehumanized nor rendered mechanical., It simply re- 
places the freedom of Bolshevistic Russia — the freedom of 
the free-booter — the freedom of the outlaw — with the law 
and order of intelligence, of experience, and of self-denial, 
in the interest of the common good — in the interest of effi- 
cient operation — and in the interest of survival. 



CHAPTER IX 

PLANNING AND DISPATCHING 

Casual Management 

Planning, in Benjamin Franklin's printing plant, was a 
simple matter. The boss waited on customers and worked with 
his men. Everybody in the shop could see what work was 
coming next, and the advice of all was available at a moment's 
notice. Each one could tell what materials and what tools were 
ready without moving from his workplace. Comparison of 
the simplicity of "planning a dinner" for the New York flat 
dweller — who drops in at the corner Delicatessen on her way 
home from the matinee, buys what she sees, and serves it in 
the original package — with what must happen before a modern 
army can be fed illustrates why systematic planning is nec- 
essary in industrial establishments employing thousands of 
men, distributed through hundreds of departments. The first 
is an example of casual management. The second — if well 
planned and well executed so that it places the hot food in the 
hand of the soldier exactly when it is needed, without waste 
and without undue expenditure of effort, regardless of how 
many thousands of miles it has come, where it was warehoused 
or how it was transported — is scientific management. 

Casual management may produce fairly satisfactory results 
for the individual — it worked all right in the small shop of 
Franklin's day; but imagine what would have happened on 
the western front if no planning and no dispatching had been 
done and if each soldier had waited until he was hungry before 
he did his shopping ! It sounds so absurd that it doesn't seem 
possible that the majority of factories are operated under 
casual management. The reason for this is psychological. 

209 



2io AMERICA VS. EUROPE IN INDUSTRY 

Neglect of Factory Management 

In the first place the owner of the rapidly growing industry 
has usually found it necessary to give most of his time to the 
sales and financial end of the business. In the second place, 
the men who have succeeded him in charge of production have 
not represented the best talent of the organization. As the 
salesman's life — with its pullmans, its palatial hotels, and its 
unlimited expense accounts — is more attractive than a job in 
a dirty, noisy factory, the bright young men in consequence 
have been attracted away from production work to selling. 
Furthermore, since the salary a man draws depends to a con- 
siderable extent upon his ability to sell his services, those who 
have remained factory executives have usually been those 
who were too poor "salesmen" in this respect to market their 
abilities elsewhere. These "poor salesmen" who remained in 
the factory have thus been instrumental in keeping factory sal- 
aries at a level much below what is needed for the class of work 
required — with the result that the flow of brains away from 
the factory has been still further stimulated. Long hours, un- 
pleasant working conditions, poor pay, and loss of caste soci- 
ally have conspired to drive men of brains and ambition out of 
the factory. 

As a result the foremen — the non-commissioned officers of 
industry, upon whose ability the efficiency of the industrial 
army depends — .steadily degenerated until the majority of 
plants were really controlled by men who remained foremen 
because they lacked the ability to become anything better or 
because they lacked the ambition to go to work at a machine. 1 
A great many foremen were actually more ignorant than their 



a During the war I knew of scores of cases where foremen threw up their jobs 
to go back to manual labor because they could earn so much more at the bench or at 
the machine. A large steel plant in which I did some work before the war was run 
by foremen paid $75 a month, while the machinists under them earned from $100 
to $125 a month. As a result the foremen were either broken-down old men who 
hadn't the nerve to move on, or young and inexperienced men who wanted the 
experience and who quit and went elsewhere once they had secured it. See later 
chapter on education. 



PLANNING AND DISPATCHING 



211 



men and, as is usual when ignorance and authority are com- 
bined, they became the principal stumbling block in the path of 
progress. This state of affairs was responsible for the fact 
that a good many of the engineers who made the earlier instal- 
lations of scientific management found it necessary to take the 
bulk of the foreman's authority away from him and to reduce 




Figure 27. A Planning Department 

Note recording clocks which men punch on leaving the window at which they secure 
their work tickets. This window is reached by entering the door marked "in." 

Bulletin board on wall. 

him to a sort of inspector before anything could be accom- 
plished. 

During the war the backward condition of the foremen 
came to light generally in connection with labor control and 
resulted, first, in an attempt to take most of his authority away 
from him and to give it to the employment manager. Subse- 
quently it was found necessary to allow the foreman to retain 
a good many of his powers, so that now a general attempt is 
being made to educate him. The result of the exodus of the 
more able from the factory was that just when brains were 



212 AMERICA VS. EUROPE IN INDUSTRY 

needed most — to cope with the exceedingly difficult problems 
which arose as our small shops, employing from fifteen or 
twenty men, grew into great industrial plants employing thous- 
ands — they were not available, having been attracted to sales, 
to finance, and to the professions. 

Ignorance of Actual Conditions 

In most cases the owner of the large plant has had no idea 
of the inefficiency which has grown up in the plant. He as- 
sumes that because all went smoothly when he or his father 
or grandfather was working with his handful of men in the 
beginning, the same methods of planning, dispatching, rate- 
setting, and the like are still in effect and still adequate. He 
has no idea of the way things are going. He has no time for 
details. When he asks the foremen how things are going 
they naturally — not being entire idiots — reply : "Everything is 
going fine, Sir!" The workmen in the department which the 
owner happens to be inspecting always seem to be at work — 
since they aren't idiots either. And so the owner trots back to 
his comfortable roll-top desk and considers a new advertising 
campaign or a change in the sales policy with men who at least 
possess the outward appearance of gentlemen. Is it any won- 
der that the usual plant — which just grew, like Topsy — is less 
than 50 per cent efficient? 

Unfortunately the worse the plant is the less the owner — 
or manager — will believe it. Such heresy hurts his vanity and 
reflects upon his ability, and the worse the plant the greater 
is the conspiracy of silence among the foremen. Even if they 
entertain doubts as to the efficiency of the shop, they don't 
know any better way. Bitter experience has taught them that 
life in a factory is naturally "just one damn thing after an- 
other" anyway — and why should they hunt trouble by suggest- 
ing to their superiors that all is not as it should be? Their 
superiors have troubles of their own and if interrupted are 



PLANNING AND DISPATCHING 213 

prone to turn with a snarl of — "Well, if you don't know your 
job, I'll have to get somebody who does !" When we consider 
how like a stepqhild the foreman has been treated and how 
little assistance he has had, as to either mechanisms or methods, 
in the solution of the stupendous problems which have arisen 
in the last fifty years while the three-man .shops have been 
welded into great industrial units employing from 20,000 to 
50,000 men, it is a wonder that the usual factory is run even 
at 50 per cent of attainable efficiency. 

Increased Dividends Through Waste Elimination, 

Another thing that has inclined the management, abetted 
by the stockholders, to concentrate on the sales rather than 
upon the factory has been the fact that the .same amount of 
effort, devoted to boosting prices and to forming combinations 
to maintain prices, has in the past produced greater dividends 
than when devoted to making the factory more efficient. 
Moreover, a manager out of touch with factory conditions is 
always fearful of labor troubles, if innovations — discouraged 
by ignorant and reactionary superintendents and formen who 
fear anything new on principle — are introduced into the plant. 

Altogether it has been a case of following the lines of least 
resistance until the road was closed at home by the revolt of 
the public, expressed in the recent buyers' strike, and abroad 
by the necessity for competing with foreign manufacturers. 
Our next step is to make every big plant as free from wastes 
of labor, material, and capital as were the small and carefully 
conducted shops of our forefathers. 

Tests of Scientific Management 

"But just where does this waste come in?" asks the 
proud owner of a million-dollar factory in the center of one 
of our big manufacturing cities. "Haven't I got a new plant, 
filled with the latest machinery, and don't I pay my 20,000 



214 AMERICA VS. EUROPE IN INDUSTRY 

workmen as much as anybody else in town ? My superintend- 
ents and foremen tell me I have the most efficiently run plant 
in the world and haven't I made a million dollars in the last 
five years? What's the matter with you, anyway?" If this 
proud parent of an infant industry can answer honestly in the 
affirmative the questions which follow he is all he thinks he is : 

1. Are your materials, supplies, machines, tools, and acces- 
sories so standardized that your working force can depend 
upon them to do 98 per cent of what they should do 300 days 
in the year? 

2. Do you know — or can you ascertain from figures whose 
accuracy is beyond question — just how much work every one 
of your men should do every day on every sort of work? 

3. Do you know at frequent and stated intervals just what 
percentage of such production standards each department and 
the business as a whole is attaining ? Do you know the causes 
— in percentages — of failures to attain such standards? Do 
all your men average 98 per cent of attainable standards? 

4. Do you know your machines are all running as much 
of the time the factory is in operation as your product permits ? 
Do you know from a daily or weekly analysis just what per- 
centage of your equipment is idle and why? Do you know 
what this idleness is costing you in interest on the investment 
in machines, buildings, and real estate ; in direct and in super- 
visory labor; in insurance, taxes, depreciation, and the like? 
Do you know that such non-productive charges are reduced 
to the minimum? 

5. Do you know that you are paying interest on material 
in stock and in process and in labor on semiprocessed material 
and upon deferred profits for the shortest possible period? 2 



2 Merchandise turnover — as rapid and as frequent as possible — has come to be 
recognized as the secret of success in both the retail and jobbing businesses, Its 
importance is only just being recognized in a great many manufacturing concerns. 
Even where the process is necessarily a long one, every day saved means a day'3 
interest on the selling price of the article and so much production capacity released 
for other work. 



PLANNING AND DISPATCHING 



215 



6. Do you know what percentage of your deliveries you 
are falling down on and why? 

7. Do you secure, periodically, accurate figures showing 
by weight or other comparable figure the percentage of waste 
to raw materials paid for? Do you know the causes of flue- 




Figure 28. Standardized Conditions 

The floors have been divided into sections and numbered so that all work and gangs 
may be exactly located by means of the symbols used on the work ticket. 

tuation in these figures? Are you certain that wastes are 
maintained at the minmum ? 

8. Are you sure that the quality of your product is being 
maintained at all times? Do you receive at regular intervals 
analytical figures showing the causes of rejections and returns 
in such a way as to be able to fix responsibility? 

9. Is your labor turnover so low that the cost of further 
effort to induce your men to remain with you — by higher wages 



216 AMERICA VS. EUROPE IN INDUSTRY 

or otherwise — would equal the cost of breaking in new men? 3 
There are a great many other just such questions which 
could be asked, but if you have been able to answer honestly 
in the affirmative all those that have been stated, you are oper- 
ating your factory under scientific management — under man- 
agement based upon facts and not upon opinion, and it is only 
a question of time before the last vestiges of casual manage- 
ment, of management based upon ignorance, upon vanity, 
and upon reaction will disappear as entirely from your plant 
as they can from any organization operated by ordinary human 
beings. 

Some Actual Results 

A friend of mine who is the industrial engineer for one 
of our largest corporations received a hurry call to a newly 
acquired plant employing 2,000 men to pass upon the necessity 
of purchasing $250,000 worth of new machines. The man- 
ager of the concern was the former owner, who had made 
several millions out of the business before he sold out to the 
trust. Machine-use records were installed and it was found 
that the machines already installed were idle enough of the 
time to take care easily of the increased output, if properly 
utilized. Besides the $250,000 thus saved, the expense of a 
new building was saved, together with insurance, taxes, power, 
supervision, labor, and similar attendant continuous expenses. 
By further and similar replacement of casual management 
with management based upon facts — systematic planning, dis- 
patching, standardization, and the like — at the end of the 
second year the economies effected were running at the rate 
of $250,000 a year and in addition the output Had been in- 



3 If with a working force of 20,000 men you have a labor turnover of 50 per cent 
you are breaking in 10,000 new men a year. If it costs you $20 to break in each 
new man, the annual turnover cost is $200,000. If you could induce half the men 
who are quitting to remain with you by spending $80,000 in wages and $10,000 for 
making the factory a more healthful place in which to work, the cost of breaking 
in the 5,000 new men would amount to only $100,000 and you would still be $10,000 
ahead. 



PLANNING AND DISPATCHING 217 

creased 37 per cent. This is about the average experience 
where casual management is replaced by scientific manage- 
ment. Yet this self-made millionaire thought he was the last 
word in efficiency and it would quite likely have taken bank- 
ruptcy to teach him how poorly his plant was really managed. 
Two years' similar work in a clothing plant employing 
1,250 people increased the output 60 per cent, raised wages 
25 per cent, improved the quality of the product, and increased 
the profits $360,000 a year. In another plant the output was 
increased 50 per cent, the productivity per man was increased 
35 per cent, 10,000 tons of coal per year were saved, and 
economies at the end of the second year were running at the 
rate of $200,000 annually — not including the profit on in- 
creased output. This sort of thing — all of which was done 
in progressive plants managed better than the average — seems 
unbelievable until you have actually taken part in it. Most 
of it is done by standardization, by the introduction of plan- 
ning and dispatching, and by building a mechanism which 
reproduces, as nearly as is possible under present conditions 
of industry, the close contact between management and men 
which existed in the old-time shop of half a dozen men. 

Purpose of Planning and Dispatching 

The principles of planning and dispatching are the same 
for all types of industries. Mechanisms differ but all operate 
to the same end — that the right thing may be available in the 
right place at the right time. This was easy in the six-man 
shop. It is a very different matter in the plant with 10,000 
employees in ten different buildings. The amount and type 
of planning machinery necessary varies with the business. In 
plants where the continuous production system predominates — 
the coffee-mill type of plant, where the raw material is fed 
in at one end and flows through various departments until 
it finally issues forth in the form of the finished product — as 



218 



AMERICA VS. EUROPE IN INDUSTRY 



in the flourmill, the pulpmill, the sawmill, and the brick factory 
— planning and dispatching are much simpler than in plants 
operated according to the job production system. The auto- 
mobile-repair shop and the machine-shop or foundry doing a 
general repair and miscellaneous special order business are 
typical examples of this latter class of plant. It should be 
borne in mind, however, that most plants are a combination 
of the two systems — that nearly every plant does a certain 
amount of routine work or of work on standard parts for 
stock and a certain amount of work on special orders. 

i 

Raw Material 
Enters Here .. 

N * 




Departments A B C D E F 

Figure 29. Graphic Analysis of Departmental Capacities 



Flow in Continuous Production Plants 

In the continuous production plant the problem is to main- 
tain a steady flow of material through the various departments 
at a rate which will keep each one of them producing to 
capacity. This sounds easy, but unless the capacity of each 
department is definitely ascertained and each one is carefully 
balanced against the others and unless steps are then taken to 
maintain the flow of work at a fixed speed there will be alter- 
nate floods and droughts which will result in each department's 
alternately suffering from congestion and then loafing for lack 
of work. 

Analysis of the capacity of each department with* a stop- 
watch very often reveals something like what is shown in 
Figure 29. 



PLANNING AND DISPATCHING 



219 



The plant perhaps was built to turn out a hundred tons 
a day — but somehow it never has — for good and sufficient 
reasons, which the superintendent has explained to the owner 
in exhausting detail until the boss is tired of hearing his 
complaints. So the plant runs along on an average output 
of between 50 and 60 tons a day. When the analysis is made, 
it is found perhaps that certain drying or furnace processes at 
F take longer than was expected and that the output of certain 
machines at C have not proved to be what their maker pro- 
phesied. 

Surplus capacity has been provided at B and E, which are 
equipped with enough machines to turn out 150 and 200 tons 
respectively (representing a 50 and a 100 per cent unnecessary 
investment in machines, buildings, light and heat, and unneces- 
sary expense for insurance, depreciation, etc. ) . Furthermore, 
these surplus machines are manned most of the time. Men 
were assigned to the work because the superintendent did not 
know how, or did not have time, to ascertain exactly the ma- 
chine capacity of the departments in question. The machine 
operators either were not familiar with the machines or would 
not tell the superintendent that they could turn out 50 to 100 
per cent more product for fear that they would have to work 
harder themselves and that some good fellows would lose their 
jobs. Or there may be some mouldy tradition about quality 
and speed being inconsistent. Or extra machines may have 
to be kept going to make up for loss of output because of 
frequent breakdowns, unstandardized raw material, or failure 
of semiprocessed material or tools and accessories to arrive 
when needed. 

Remedy for Uneven Flow 

The remedy is, of course, standardization, planning before- 
hand, so that, the right thing may be available in the right 
place at the right time, and dispatching the right thing to the 



220 AMERICA VS. EUROPE IN INDUSTRY 

right place at the right time. 4 In this particular case the 
reason why the machines at F were not producing to rated 
capacity would be determined by analytical study and the 
machines speeded up or — as a last resort — supplemented with 
one or two more machines. The drying process at F would 
be controlled by the introduction of instruments to record 
temperature and moisture and the drying time reduced. The 
men in all departments would be paid in proportion to their 
attainment of carefully and fairly set standards. The extra 
machines would be disposed of and the extra manufacturing 
space — if possible — utilized for some other purpose. Inas- 
much as all departments were quite probably overmanned and 
underproducing, a characteristic result of this replacement of 
casual management by management based upon facts, would 
be a daily output of no tons with about two-thirds of the 
working force required to produce 60 tons. 

Even where the "squeezes" in the flow of production are 
less evident than in the case just cited, lack of standardization, 
planning, and dispatching in the continuous production type 
of plant usually results in variations in the speed of flow of 
the product — because of unforeseen interruptions in output 
in one department after another — which cause the men in each 
department in turn first to soldier on the job, while waiting 
for semiprocessed parts to arrive, and then to be so hampered 
by the congestion of parts which have finally arrived in a 
flood — like logs in a spring freshet— that they cannot work to 
advantage — a handicap usually further increased by the vocif- 
erous urgency of the foremen, who are endeavoring to break 

^Further explanation of these terms will follow. In the meantime it is sufficient 
to remember that planning is what is done before the transcontinental train leaves 
Chicago for San Francisco. It is decided that in order that the train may arrive at 
the hour set it must reach Omaha, Denver, Salt Lake, etc., at certain specified times, 
that fresh engines must be attached at certain places, that diners and food must be 
ready at certain points. Dispatching consists of the practical means adopted to make 
this dream come true. Routing, arranging the road by which the train must travel — 
departments, machines, sometimes the operators — is usually part of planning, although 
an emergency change in the route in the middle of the journey might properly come 
under "dispatching." "Scheduling" is a term, somewhat loosely used, to include the 
writing down of the stations along the route which a particular piece of work is to 
follow, together with the time of arrival at each one. 



PLANNING AND DISPATCHING 2 2I 

up the jam by sheer noise and strenuousness. The immediate 
result is, of course, succeeding waves in one department after 
another of semi-idleness — for which the company pays — and 
of feverish strenuousness, characterized more by bustle than 
by effective results. The broad result is a plant output con- 
sistently below standard. 

Time and again I have seen difficulties arise in one depart- 
ment, which even ordinary forethought should have anticipated 
and provided against, which have partly shut down the depart- 
ment. The men after standing about half an hour would 
be rushed into some other department, would work to a disad- 
vantage on something which shouldn't have been done, as it 
only increased congestion in that department, and then rushed 
back to their own department to be urged to impossible en- 
deavors by a frantic foreman who feared the blame for a 
loss of output which would ultimately be reflected in the total 
plant output. Meantime this traffic jam upset every depart- 
ment, just as surely as a fire on Fifth Avenue at 5 p. m. is 
sooner or later felt on every artery of traffic within a mile 
of it. The dispatching of traffic on Fifth- Avenue by means 
of the signal towers increased the carrying capacity of the 
street nearly 40 per cent, because more square feet of pavement 
were thrown into continuous and steady use and because the 
pressure behind each congestion was reduced. Dispatching 
does the same thing to a factory. 

Requisites for Power-Regulated Speed 

Where the speed of flow in the continuous production plant 
is mechanically regulated by a chain or belt, as in the final 
assembly at the Ford plant, the establishment of a power- 
regulated speed implies standardization sufficient to regulate 
the speed of all proceeding processes, so that every part arrives 
at each subsequent point at the time planned. A vast amount 
of planning and standardization are here supplemented by 



222 AMERICA VS. EUROPE IN INDUSTRY 

mechanical dispatching — by means of the chain assembly. 
Even so, unless the amount of work each man should do is 
carefully ascertained it is possible to have millions invested 
in standardized machinery and a working force only 70 or 
80 per cent efficient. Not long ago I spent some time in a 
large motor plant in which this was the case. While there 
were some notable exceptions, the men working along the 
chain drive assemblies were not averaging over 80 per cent 
efficient. 5 I discussed this later with an industrial engineer, 
a number of whose men had worked at this particular plant, 
and he told me that the firm was willing to have their work- 
men only 80 per cent efficient in view of the possibility of 
getting out a few more cars per day — upon which the profits 
were large at the time. 

Flow in Job Production Plants 

As the continuous production plant merges into the job 
production type departments are replaced by machines. In- 
stead of 100 tons of raw material moving from department A 
through departments B, C, D, etc., in regular order, and finally 
emerging from F as finished product, half a pound of steel- 
destined for a particular part of a particular machine belong- 
ing to a particular firm — perhaps starts from a storeroom, 
is taken to a machine in department X on the top floor of one 
building, is then machined in another building — say in depart- 
ment B — returns to department X again, and finally emerges 
from A ready for the final assembly. Under such circum- 
stances the necessity for laying out a particular route for 
this piece to travel is at once evident. Thousands of other 
pieces are traveling by different routes to and from the same 
machines. Suppose they all arrive at Bill Jones' machine in 
department X at the same moment. Bill would be as badly 
off as would the railroad passengers if all the transcontinental 

"See chapter on rate-setting. 



PLANNING AND DISPATCHING 



223 



tried to run trains over all their cross-overs at the same time. 

Furthermore, we must have this part ready to ship at a 
certain time or we'll lose a customer. Before we can ship it, 
it must be united with certain other parts It has got to meet 
these parts somewhere. Besides we don't want these parts 
or the piece itself trucked around any more than we can help, 
as trucking costs money. We want to keep our machines all 
busy and we must have work enough ahead for each of our, 
5,000 men so they will feel justified in doing a good day's 
work. And how do we know how long this job should take 
each man anyhow? It begins to look pretty complicated, 
doesn't it? At any rate, Mr. Factory Owner — who is analyz- 
ing the situation — has a luncheon engagement with a clever 
advertising man, so he draws himself up and says, "I believe 
in hiring competent foremen and leaving the details to them," 
and departs. 

This is too much to expect of a lot of poor, ignorant, 
underpaid foremen, but that is just what has been done in 
the majority of cases. In England I went through a plant 
employing over 12,000 men. I asked the man who was show- 
ing me through how they planned their work. 

"The foremen circulate around, into each other's depart- 
ments, and see what is coming to them next," he said. 

"But don't parts sometimes get lost?" I asked. 

"How the devil could they lose a twelve-inch gun?" he 
retorted. 

And there you have it — the rough-and-ready answer block- 
ing further inquiry — the answer generations of foremen and 
superintendents had made to generations of inquiries — if any 
have paused to analyze and ask. 

The Production Clerk 

In plants where parts were smaller and must journey to 
more machines at higher speed, snarls, wrecks, and losses 



224 



AMERICA VS. EUROPE IN INDUSTRY 



occurred so frequently that they could no longer be ignored 
by "passing the buck" to the foreman. In such plants there 
grew up an institution known as "stock-chasers" — a motley 
crew — each one half Hawkshaw and half Paul Revere — whose 
business it was to trail lost parts and to rush madly through 
the plant shrieking that an order was overdue — "the customer 
and the sales department are upon us ! Speed, lest all perish !" 
These poor fish were usually under a sort of super-Hawkshaw 
known as the "production clerk" who acted as whipping boy 
for the superintendent and who was alternately roasted and 
canned as the sales department descended upon the factory, 
clothed in the habilements of wrath, oratory, and a silk 
shirt. 

The production clerk — under casual management — had no 
authority in the plant, but he received copies of the production 
orders when they were issued from the engineering depart- 
ment and he was supposed to know by instinct — and the aid 
of his tatterdemalions — just where some thousands of parts 
were, what had been done to each individually, and how long 
it would take to perform subsequent and diversified operations 
upon them sufficient to permit their delivery to the customer 
when wanted. Wasn't he the production clerk and hadn't 
he been given a copy of the production order ? Well, I should 
think he ought to know ! — and the superintendent and the sales 
manager — having placed the blame, retired to their private 
offices with as much satisfaction as if they had really done 
something constructive. In the meantime the workmen were 
free to select the jobs on which they could make the most 
money, piece rates having been set by bargain and not by 
analytical time study. Foremen didn't like to start trouble in 
their departments and so, except in case of a descent from 
the sales department, things followed pretty much the line 
of least resistance with facility in excuse-making taking the 
place of efficient operation. 



PLANNING AND DISPATCHING 225 

Elements of All Systems 

Gradually the solution is being worked out. About fifteen 
years ago the pioneer industrial engineers — Taylor, Emerson, 
and Gantt — began to give to the world definite planning sys- 
tems. These have been widely elaborated upon but the under- 
lying principle of all may be said to consist of three elements : 

1. The establishment of a definite time for each operation, 

— by means or standardization? 

2. Planning — on paper — to perform these operations in 

the most advantageous sequence, with due considera- 
tion for the other work in the plant. 

3. Dispatching each part through the plant in such a 

manner that it arrived at the various stations by 
the route planned and at the time scheduled. 

1. Standardization 

It is obvious that you cannot plan jobs to a machine until 
you know approximately how long each job will take. It also 
follows that the more exactly you determine the time required 
for each job the less likely you are to make errors in scheduling 
which will throw the whole plan out and perhaps result in the 
necessity for rerouting and rescheduling all the jobs in the 
department. Standardization of materials, machines, tools, 
and equipment is therefore necessary. (See Chapters VIII 
and XI.) 

2, Planning 

Planning methods vary with every plant and serve as a 
means of self-expression for every industrial engineer who 
installs a system, but essential parts are : 

(a) A reservoir (see Figure 30) of some sort — usually a 
file — for orders which are ready for the plant. The receipt 

'Remember this includes all the activities that come under personnel direction and 
tend to maintain the quality of the workman through his health and happiness. See 
Chapter VIII, page 185. 



226 



AMERICA VS. EUROPE IN INDUSTRY 




Figure 30. One Type of Reservoir 

The plant orders are filed at the back. As the time approaches for them to he put 
"in work" the salient facts are entered upon the master schedule (Figure 31), which 
is classified according to urgency and material — it being desirable m this case to run 
the department on the fewest possible materials each day — by means of the colored 
"flags" shown attached to the tops of the master schedules. 

of such an order in the planning department assumes that 
the management permits manufacture for stock or that a sale 
has been made, has been approved as to credit and design, 
has passed the drafting-room, and is ready for the shop. The 
date of delivery promised the customer is usually the control 
which determines the date on which the production orders are 
transferred to the "in work" mechanism, which consists of — ■ 



PLANNING AND DISPATCHING 



22J 



(b) A dissecting mechanism (see Figure 31) by means 
of which the order is split up into its elements and the time 
for processing each part is looked up or determined. 7 In a 
completely standardized plant a symbol on the order would 
locate all such information in the "library." Even where the 



DATE 


pprFivFn 6-23-21 




MASTER 


SCHEDULE 




ORDER NO. 


C2088 


DATE PROMISED 7-30-21 






6-21-21 








LOT 


»n. 2 






Yes 


REMARKS 




NEW MOULD REQUIRED 


MIX 


30 


30 


7 


7 


73 


















NO. PCS. 


300 


100 


50 


150 


75 


















DESCRIP- 
TION 


Bl 


El 


E2 


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D4 


















UNIT WT. 


20 


10.5 


6.5 


3.2 


9.7 


















TOTAL WT. 


6000 


1050 


325 


480 


723 


















GANG NO. 


463 


463 


460 


460 


461 




















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Figure 31. One Type of Dissecting Mechanism 

This sheet is used to dissect the order and to determine the day each section must 
pass the various stations on the road of manufacture in order to make the delivery 
required. Italic figures indicate date planned; roman figures indicate date actually 

finished. 

particular machine had not been previously manufactured 
reference to master time schedules 8 would, with very little 
difficulty, permit determination on the time element to the 



7 One of the commonest ways of doing this is to split the order up into jobs for 
certain machines — requiring a full day's work where possible — and to enter the whole 
thing on workmen's tickets. (See Figure 32.) The date the work is actually performed 
is then added when the work is started in the shop. 

8 These give the time required for elemental and common operations such as drilling 
through a certain thickness of a certain metal and like standard operations. 



228 



AMERICA VS. EUROPE IN INDUSTRY 



point where one or two experiments would reduce the unknown 
time element to an inconsiderable fraction of the whole. 
Where standardization is incomplete operation times are neces- 
sarily estimated. 

In doing this work due consideration must be given to the 
time at which work on each part of the machine to be fabri- 
cated must be started in order to insure its uniting properly 























NAME EMPLOYEE 


MAN NO. 


DEPT. NO. 
Si- 


DATE 


STARTED 


CONTINUED 


FINISHED 


WITH NO. 


MACH. NO. 
ND- 


ORDER NO. 

D-S517Q 


OPER. NO. 
DL-SO 


ACCOUNT NO. 
L-D-8-1 


DELAY AND CAUSE 


STD. TIME 
8-0-0 


OPERATION 


TIME FINISHED 


QUANTITY 
SOO 


PRODUCT 
MXQVR 


MAT. 


PCS. 


DONE 


WT. DONE 


TIME STARTED 












TIME ELAPSED 












RATE 
.45 






















WAGES 












BURDEN 
.SO 





























Figure 32. Work Ticket or Service Card (in triplicate) 

White, blue, and pink copies are clipped together with carbons between until the job is 
given to the workman, who is given the white copy (original), while the other two 
remain in the top pocket of the dispatch board. When the job is finished all are 
clipped together again and the time entered, after which the white ticket goes to the 
timekeeping department in order to figure the man's wages. The blue copy (duplicate) 
is used to figure the cost of the job, and the pink (triplicate) to figure the departmental 

cost. 

with the other parts at various assembly points as all the parts 
progress through the plant. This amounts to the determina- 
tion of separate control dates for each part of the order and 
is called "scheduling." The most advantageous route — from 
the standpoint of cutting down handling costs, from the stand- 
point of the most suitable machine for the work, etc. — is con- 
sidered at this time also. 

The tools, jigs, and accessories required are determined 



PLANNING AND DISPATCHING 



229 






































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230 



AMERICA VS. EUROPE IN INDUSTRY 







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Figure 34. Dispatch Board Containing Work Tickets 

Note decimal time clock and window at which workmen receive the work ticket 
for the next job upon turning in the ticket for the completed job. 



PLANNING AND DISPATCHING 



231 



and sufficient material is reserved in the plant stores. In doing 
this work arrangements are made for the issuance of the 
proper tool orders, inspection and move orders, and for proc- 
essing in lots which will reduce unproductive machine changes 
("set-ups") to the minimum. 

(c) A planning mechanism (see Figure 33), by means of 
which the new order is fitted into the existing orders already 
"in work" in the plant. The commonest form of planning 
mechanism is a large sheet of paper upon which the most 
urgent orders, pushed out of the reservoir by means of an 
automatic tickler of some sort, are entered opposite the ma- 
chines, operators, or departments which are to do the work. 
Continuous measurement of actual performance against work 
planned is an essential to efficient planning. 

3. Dispatching and Graphic Control 

(a) A dispatching mechanism (see Figure 34), by means 
of which orders to perform the work are dispatched to the 
operators who are to do the work. This is usually accom- 
plished by means of work tickets (see Figure 32) arranged 
on a dispatch board, making it possible to determine at a glance : 

(1) Just what each man is doing. 

(2) Just what he is to do next. 

(3) How much work is planned ahead for him. 

Adjustments caused by failure to perform work as planned 
are made on this board, which usually consists of the three 
pockets illustrated, the lowest of them containing a "reservoir 
of work" sufficient to provide for any ordinary accident, 

(b) Certain graphic control mechanisms designed to em- 
phasize for the benefit of both executives and men the essen- 
tials of effective manufacture and to direct attention continu- 
ously and immediately to the attainment of, or the failure 
to attain, standards of output, quality, waste avoidance, etc. 



2$2 AMERICA VS. EUROPE IN INDUSTRY 

Summary of Methods 

We have endeavored to show why systematic planning is 
necessary and to summarize the remedy for the conditions that 
developed — the growing pains as it were — as industry ex- 
panded from the three-man shop into the plant employing 
1,000 — or even 50,000 — men. Throughout it all the trend has 
been unmistakably from the job production toward the con- 
tinuous production shop, toward a standardized product. 

This tendency has reached its limit, at present, in progres- 
sive manufacturing in the motor industry, where the speed 
of the continuous progress is mechanically fixed. Where this 
has been impossible, the speed of the product has been regu- 
lated by feeding material into the plant and into each depart- 
ment at a fixed rate — so that each department had to process 
its quota or be buried under the accumulation. When the 
variation in the work done was too great for this, planning 
mechanisms have been designed to organize the sequences of 
machines required for certain sorts of jobs, regardless of 
where the machines were located, into continuous production 
plants, as it were. Even the most stubborn repair-shop— 
where the next job depends almost upon the whim of fate, 
upon a skid on the wet pavement, or a crash with a street-car 
— is amenable to a certain amount of systematic planning. A 
dispatch board — showing what each mechanic is doing and 
what he is to do next — can be made to cover the majority 
of the men, and a reservoir of stock work can be installed 
showing what each man is to do when not otherwise occupied. 

The Planning System and Dividends 

In installing the system great care must be exercised to 
avoid being so carried away with enthusiasm as to sacrifice 
common sense to the love of exactness. The president of a 
company which contains one of the most famous installations 
of scientific management in the country — a man thoroughly 



PLANNING AND DISPATCHING 233 

convinced of its value — told me that his company was using 
only 80 per cent of the system insisted upon by the engineer — 
that the other 20 per cent had cost more to maintain than it 
earned — and so had been discarded. The same tests by which 
the efficiency of the business is judged must be applied to the 
planning system and every mechanism — no matter how clever, 
how dear to its progenitor, or how necessary to make a "com- 
plete installation" — which does not pay for itself and earn a 
dividend in time and material saved and in capital utilized, 
must be ruthlessly rejected. 

One reason why some of the more conservative manufac- 
turers have hesitated to install scientific management has been 
their fear of increasing their "overhead" or non-productive 
expense. In one installation of considerable size the "stock- 
chasers" who already existed were replaced by two-thirds as 
many clerks in the planning department. The salary list 
remained about the same, as higher class men are required for 
systematic planning than for foot work around the plant. In 
one of the oldest installations of scientific management, in 
which every refinement has been developed to the utmost, 14 
per cent of the entire factory force are engaged in planning 
and kindred work. My own experience has proved to me 
that either productive plant labor or non-productive plant 
labor is decreased sufficiently by the introduction of scientific 
management to pay for all extra overhead expense at least ten 
times over. "Overhead" is not nearly so dangerous as "total 
labor cost per unit produced." The men who demand facts 
— not opinions — from subordinates are rapidly learning that. 

In this chapter we have endeavored to trace the develop- 
ment of industry which has made scientific management neces- 
sary and to touch briefly upon the theory of systematic plan- 
ning and dispatching and their development in America. In 
the next chapter we will discuss the development of the same 
elements of scientific management in Europe. 



CHAPTER X 

EUROPEAN METHODS OF PLANNING AND 
DISPATCHING 

Scientific Management in France 

Scientific management has made a very strong appeal to 
France and is gaining ground rapidly, thanks to the efforts of 
such men as Henri le Chatelier and Charles de Freminville, 
who, both by their lectures at the Sarbonne and by their work 
as engineers, have demonstrated its value to industry. It was 
officially adopted by the government for use in plants manu- 
facturing war materials and a thorough exposition of it is 
a part of the military training of the French army officer — and 
of the officers from other countries taking the French military 
courses. I discussed the situation at some length with the 
gentlemen mentioned and with J. de Morinni who is installing 
scientific management in various plants in France and Belgium. 
There seems to be something about the substitution of syste- 
matically gathered and carefully correlated facts for the pur- 
pose of industrial management which makes a strong appeal to 
the logical French mind. 

The idea is not entirely a new one in France, for consider- 
able research work was done and some application of the 
principles of standardization and time study was made over 
two hundred years ago by Vauban, the celebrated military 
engineer (1633-1707), and later by Coulomb, the scientist 
(1736- 1 806). Without doubt a wider and more rapid appli- 
cation of their discoveries to industry would have been made 
as industrial units grew in size had it not been for the deep 
respect each French workman has for the individual methods 
developed by his own father. This has resulted in an indi- 

234 



EUROPEAN PLANNING AND DISPATCHING 235 

vidual standardization, which the push-carts full of fearful 
and weird instruments wheeled about the streets of Paris by 
repair men exemplify. In certain machine-shops where in- 
dustrial engineers I have known have worked, this trait has 
led to a most embarrassing variety of tools. Moreover, each 
workman can be separated from his own tools only with the 
greatest difficulty. 

Some Notable Examples 

During the war a very complete system of planning and 
dispatching was installed in L' Atelier Central de Reparations 
du Service Automobile, with route cards, work tickets, instruc- 
tion cards, stores ledger, and all the usual mechanism of 
scientific management. Symbolization was very complete and 
the planning boards developed embodied some unusual fea- 
tures, such as the use of various colored T-shaped tickets and 
disks to indicate graphically the progress of the work on each 
vehicle. Each job is represented on the board by a movable 
tablet perhaps 2 x 10 inches in size, equipped with two rows 
of pegs, upon which the tickets and disks are hung so that 
the state of the work on each vehicle being repaired is evident 
at a glance. 

The installation at the Penhoet shipyard, which employs 
about 3,000 workmen, is especially complete as to instruction 
cards. Considerable standardization work has been done and 
the planning sheets display some unusual features. In the 
standardization of labor, especial attention is given to dividing 
preparation time from machine time and handwork time, and 
a different fatigue allowance — .shown on the instruction card — 
is made for each. An installation of scientific management 
in a powder plant during the war resulted in an increase in 
the output of each worker amounting to over 300 per cent in 
less than two years. The equipment, picking tables, etc., were 
standardized and the motions of workers were studied and 



236 



AMERICA VS. EUROPE IN INDUSTRY 




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EUROPEAN PLANNING AND DISPATCHING 237 

those which were unnecessary were eliminated. Individual 
production bulletins were posted and very complete instruction 
cards were devised. 

There is an excellent installation of scientific management 
at St. Nazaire and the work at the Schneider plants is particu- 
larly interesting — there being over 100,000 instruction cards 
at Le Creusot alone. At a plant manufacturing aviation 
motors, planning is particularly complete, and at another dis- 
patching has been carried to the point where every move of 
every part is planned from the central office. The planning 
charts in most common use are similar to those used at the 
Tabor Company in Philadelphia or to the Gantt chart (see 
page 229), planning boards being a more recent development. 
Stores control is particularly good in the more modern French 
plants. 

Progressive Machining 

In a certain large locomotive plant I found progressive 
machining in use and an excellent graphic planning chart for 
Pacific and Mogul locomotives. The major operations were 
indicated in sequence by number in the vertical column at the 
left — the first operation number starting at the bottom of the 
sheet. The dates ran from left to right across the top of the 
page. A curve then drawn upward and to the right — from 
the lower left-hand corner of the chart — indicated the planned 
date for each operation. The actual date of each operation 
was indicated by a dot or a short line inserted on the horizontal 
operation number line beneath the date upon which the opera- 
tion was actually performed. Each locomotive was repre- 
sented by different colored curves and dots and the whole 
thing showed the degree of adherence to the planned manu- 
facturing schedule in an exceedingly forceful manner. 

In this plant the machine standardization books, which 
contained complete information in regard to each machine and 



2 3 8 



AMERICA VS. EUROPE IN INDUSTRY 



the output which .scientific experiment had established for it, 
were particularly well worked out. The shop layout had 
been given close attention with a view to avoiding carrying 
materials in process twice over the same ground, and each 
floor section was clearly numbered. All castings to be ma- 
chined were whitewashed, and machining, where possible, 
indicated upon them in pencil. All material and tools were 



Major 
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Figure 2>&- A Graphic Planning Chart 

collected and delivered to the machine before the workman 
was allowed to start on the job. Very complete instruction 
cards, carrying unit operation times, sketches of the work to 
be done, and full directions for carrying it out were in use. 

In a large forgeshop, standardization, planning and dis- 
patching, and instruction cards resulted in increasing the out- 
put per man per day 36 per cent in spite of the fact that the 
working day was cut from ten to eight hours during the period. 
In a certain group of very modern machine-shops I found tool- 
rooms, standard tools delivered to the workmen, and all the 
most approved Taylor methods. 

A Well-Developed Planning System 

The planning system in use in one very large French 
establishment working mostly on heavy parts is particularly 



EUROPEAN PLANNING AND DISPATCHING 



239 



FEOTXE CONSTRUCTION 



Gsnre do Travail : 

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MtCANIQUE GiNtRALE ET TURBINES 

COMMANDS _ ...X70XR . .V;'JI«_. " Society E&rrsls* _ 

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Pages 2 to 4 of this form (not shown here) are practically the same as the lower 

half of this page. 



240 



AMERICA VS. EUROPE IN INDUSTRY 



worthy of study. The foundation of the whole thing is the 
feuille d' instruction, or instruction card illustrated (see Figure 
37). As will be noted, the number 60 in the left-hand upper 
corner indicates the group of instruction cards, of which this 
is the seventh. To the right is given the usual information 
as to the order number, the number of pieces to be machined, 
the description of the operation, the machine number, etc. 
Below is a sketch giving the dimensions of the completed piece 
and underneath the detailed instructions to the workmen in- 
cluding the speeds, feeds, tool, cut, etc. At the bottom is 
given the total time allowed per piece and the piece rate in 
francs. 

Pinned to this feuille oY instruction is a bon, or work ticket, 
giving the name of the man who is expected to do the work, 
the rate per piece, the estimated time, the actual time, the 
record of inspection and similar information, as shown by 
Figure 38. On the back is the record of tools received and 
returned and the delays with reasons therefor. 

The issuance of this instruction card and work ticket neces- 
sarily implies standardization. The two are pinned together 
and inserted in the folder marked fiche de fabrication (Figure 
39). This folder contains on its face a digest of the feuille 
d' instruction sheets inside, which summarizes all the opera- 
tions that are to be performed on these particular parts of the 
machine. Altogether in this particular case there are 17 such 
operations, each one of which is covered by a separate feuille 
d' instruction and bon. It will be noted that this fiche de fabri- 
cation gives the number of pieces in each lot, the machine, 
the estimated time, and the actual time for each group of 
operation. 

There is also a material schedule, situation des pieces brutes 
principales, upon which is worked out the dates at which the 
raw material for each part will be needed, and when it is 
received, an account of follow-up letters, and like information. 



EUROPEAN PLANNING AND DISPATCHING 



241 



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MECANIQUE GEN£«ALE £T TURBINES 



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Figure 39. Folder for Instruction Card and Work Ticket (Fiche de 

Fabrication) 



EUROPEAN PLANNING AND DISPATCHING 



243 



From the information in fie he de fabrication and the ma- 
terial schedule it is possible to predict very closely when the 
job will be complete and when it should arrive at each station 
along the route. This is all laid out graphically on the manu- 
facturing schedule, a chart of the Gantt type, upon which the 
time is platted. 

As each operation is to be performed the instruction card 
is given out with the work ticket. These are returned to the 
planning department when the particular job is finished. 
Since the man in charge of the fiche de fabrication knows how 
long each operation should take and what is coming next, all 
can be prepared for the work. Furthermore, as the progress 
of each element is checked up as the actual work is compared 
with the planned work in the spaces provided, any changes 
necessary can be made in the general plan and on the manu- 
facturing schedule. Altogether the whole system is very com- 
plete, simple, and effective and, so far as it was possible to 
judge, the results being obtained were excellent. 

Progressive Manufacture in France 

Progressive manufacturing in France has developed princi- 
pally in the automobile industry, just as in America, because 
that is a comparatively recent industry which has been free 
to develop in newly constructed factories and under modern 
management methods, unhandicapped by a mass of tradition, 
"rule-of-thumb," and inherited prejudice, masquerading as 
"experience." The men who have gone furthest in France, 
just as in America, have many of them been men attracted 
from other lines of business endeavor who have brought a 
fresh viewpoint to bear on the science of manufacture, with 
the result that originality has flourished and methods have 
been adopted on the basis of careful analysis of existing 
factors. 

Certain elements of progressive manufacturing existed in 



244 



AMERICA VS. EUROPE IN INDUSTRY 



all three of the French automobile plants I visited. In one 
of them it amounted to little more than routing all the machines 
through the factory in one direction. In another it was evi- 
dent that the management possessed a very good idea of the 
principles involved and were putting them into effect as fully 
as was possible without some mechanical means of regulating 
the progress of the product through the plant. The third 
plant might have been located in Detroit or Cleveland or in 
any other American center of modern automobile manufacture. 
Machine tools were arranged for progressive machining and 
a power-driven chain assembly was in process of installation. 

Manufacturing Programs 

In this last plant a regular manufacturing program, out- 
lining the work to be done during the following six months, 
is decided upon, and is dissected and studied in much the same 
way as in America. 1 The work is then laid out by operations 
on a basis of time required for each process, and the work is 
classified as to urgency. In other words, the route being fixed 
by the factory layout, the time schedule is made out. This 
schedule is worked out for the cars in lots of a hundred from 
the instruction cards, which are very complete, containing a 
detailed sketch of each part and the unit times for each 
operation. 

Orders are issued to the various foremen in accordance 
with this schedule and to the men by means of the usual work 
ticket, which has the usual information, including a space 
in which to record spoilage, and is accompanied by the instruc- 
tion card, giving the time allowed, etc. As the parts are 
completed they are sent to the stockrooms, where parts suffi- 
cient for a thousand cars are always maintained. This mini- 
mum is assured by means of graphs, such as Figure 40. 

As the parts are issued for assembly the line AB, repre- 



^his amounted to 120 cars per day at the time of my visit. 



EUROPEAN PLANNING AND DISPATCHING 



245 



senting the number of parts in stock, is swallowed up by the 
solid shading representing stock issued. A regular stock 
ledger is kept in addition, showing the balance of stock, requi- 
sition number, to whom and when parts are issued, etc. In 
the case of stores — raw material and parts purchased outside 
the plant — certain follow-up data are added. 

The plant has a central planning department from which 
the work is dispatched, the necessary changes in schedule being 



3500 3600 


( 

1 


^^^^^^IJ 1 


.„ 


^^^^^S 


j-J 




1 



Figure 40. Stock Control Graph 

made to accommodate such variations from the plan as are 
necessary. The toolroom is very complete, although no effort 
has been made as yet to deliver tools to the men with the work 
ticket. 

At another plant, which was not so perfect mechanically 
and in which the plant layout had not been so carefully worked 
out, move tickets were in use and the dispatch offices located 
in each department were very completely equipped with control 
charts and graphs. As nearly as I could determine, they had 
developed a variety of decentralized systematic control, such 
as I found in certain plants in England. 

Mass Production in Germany 

In the largest and most modern German factories mass 
production has been highly developed. Standardization has 



246 AMERICA VS. EUROPE IN INDUSTRY 

been carried out with characteristic German thoroughness as 
regards materials, labor accessories, and procedure. Labor 
standarization, especially as regards training, discipline, and 
fitting the man to the job, has been carried to a point in Ger- 
many which has resulted in an organization that makes in- 
structions of the "fool-proof" variety much less necessary 
than in the majority of countries. By training a boy for a 
certain job, inculcating in him admiration for that job, inspir- 
ing him with a love of order and organization, and with a 
respect for authority which amounts almost to a religion, a 
type of workman and foreman is produced which functions 
like a part of a well-oiled machine. Each man just exactly 
fits and the organization runs without friction. For this 
reason much "system" which is necessary in America, where 
we are all trained for limousines and luxury, and in England, 
where the freedom of the individual is a fetish, is entirelv 
unnecessary. A factory manned by a highly intelligent, highly 
trained and organized working force can be run by entirely 
different methods from one manned with machinery, supple- 
mented here and there by strong backs and weak heads. This 
must be kept in mind while reading what follows. 

Progressive Manufacture in Germany 

Progressive manufacture is the key-note of one large plant 
in which I spent several days. The plant is designed for that 
system, everything from materials and building to sales propa- 
ganda has been standardized to the extreme limit, and the 
products of medium size move through majestically in large 
masses in a manner which makes for high quality and low 
production cost. Each article of the sort manufactured passes 
systematically on small cars from machine to machine, advanc- 
ing step by step to completion. On the way it pauses in va- 
rious intermediate storerooms which act as "reservoirs of 
work" between departments, so that each department may 



EUROPEAN PLANNING AND DISPATCHING 247 

work its hardest at all times without running out of semi- 
processed material and without swamping the succeeding de- 
partment. The larger machines follow the same general plan. 
The rough castings, weighing tons, enter at one door of a 
special department, pass systematically, transported by cranes, 
to the lathes, milling, planing, and drilling machines, and are 
then fitted together in the erecting department as one single 
machine. This is then provided with certain parts from other 
departments, is painted, tested, 2 and passes out complete, with- 
out having made a detour. 

The smaller machines are manufactured in such large 
quantities that it is possible to lay out a manufacturing pro- 
gram and work from the standard parts in the stockrooms, 
the principle requisite being to have plenty of small parts 
distributed along the way in the departments where they will 
be required. In the case of the big machines the parts needed 
are collected and put together systematically just before they 
are used, at the floor section set apart for the assembly of 
the machine. 

Forms Used 

The path of an order through the organization is shown 
by a chart (see Figure 5, page 55), and the methods of assem- 
bling the cost by another chart (see Figure 4, page 49). 
Upon the receipt of the order at the plant there is made out 
at the general factory office a folder containing: 

1. A Precalculation sheet (Figure 41), which contains full 
information about the order, including the date of delivery 
required, and which sets the price per piece for doing each 
part of the work. The sheet also contains space to enter, 
after the work is done, its actual cost, so that the estimated 
and the actual will be compared. The original of this form 



2 A red card is attached to parts which prove defective at any of the testing 
stations. 



248 



AMERICA VS. EUROPE IN INDUSTRY 













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Machine Card 

On this sheet the "planned cost" and the "actual cost" 
are computed. 



EUROPEAN PLANNING AND DISPATCHING 



249 



remains in the general factory office in the folder, while a 
carbon copy on a buff paper goes to the foreman of the first 
department which will do work on the job. 

2. A material statement (see Figure 42), in quadruplicate, 
the sections of which are distributed as follows : 

(a) To the general stores office, as a notification to 

provide material. 

(b) To material stores, as an order to deliver the ma- 

terial to the departmental stockroom. 3 

(c) To the departmental stockroom, to show the clerk 

what the material is needed for, when it is needed, 
and by whom. 

(d) To the workman — via his foreman — to notify him 

material is ready for him. 

3. A tracer card, which is made out in duplicate, one copy 
going to the foreman and one to the follow-up department in 
the general factory office. This is filed to appear eight days 
before the date the order is due, when a man from the general 
office goes out into the factory to investigate the state of the 
order. When the foreman decides that the department is in 
shape to do the work, taking into consideration the delivery 
dates demanded by his material statement and the work already 
on the floor, his clerk issues a work ticket (see Figure 42), 
which starts the workman on the job. With this work ticket 
is delivered a blue-print and a list of any special tools required. 
Workmen are always equipped with the tools they ordinarily 
need, which they take out in lots of a specified size. In case 
additional instructions are needed by the workman — which is 
rather unlikely considering his training and the completeness 
of the blue-prints — he goes to the foreman for them. In case 



3 Both the general material stores and the stockroom are provided with a complete 
stores ledger and the stock cards are exchanged weekly and checked by the general 
stores office. When the material statements are sent to the storeroom, an envelope 
with tags for each part goes with them. These tags, duly numbered, are attached to 
the parts as they are issued and control their route through the plant. When the 
envelope is empty the storekeeper knows that everything is on its way. 



250 



AMERICA VS. EUROPE IN INDUSTRY 





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Figure 42. Inside of Folder Used to 

Sections headed "Material" and "Zusammenstellung fur Materialriicklieferungen" are 
superimposed marked "Material-Aufstellung") and work tickets (sections marked 



EUROPEAN PLANNING AND DISPATCHING 



2 5I 



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Collect Cost Data in a German Factory- 
printed on the inside of the folder which contains a material statement (section 
"Akkord-Zettel"). The upper one has a broad blue band across the top. 



252 



AMERICA VS. EUROPE IN INDUSTRY 



of any unusual occurrence which makes it impossible to get 
out the work in the time estimated by the Precalculation de- 
partment, a special work ticket with a heavy blue line across 
the top is turned in at the time office after the workman com- 
pletes the work. (See Figure 42.) 

In addition there is an order of work ticket by means of 
which the foreman notifies the general stores office in what 
sequence he wants the material for the different jobs to be 
delivered, an order change ticket, by means of which he notifies 
the general stores office if a change is necessary in this order, 
and a reorder ticket, by means of which defective or spoiled 
material may be replaced. There is also a "short of material 
notice," which is sent the foreman whenever the material 
ordered is lacking in the storeroom. This is made out in 
duplicate and a copy is sent to the purchasing department via 
the general stores office. 

As various parts of the job are completed, the forms cover- 
ing the work done are returned to the general factory office 
where they are filed in the folder (see Figure 42). When the 
forms are all in, the folder is turned over to the Hollerith 
machine operator, who works out departmental and total labor 
and material costs, etc., and enters them in the spaces provided 
for them in the folder, which thus becomes a permanent cost 
record. The system is simple, and with carefully laid out 
factories and a well-trained organization results in a high 
degree of operating efficiency. 

Planning and Dispatching in Germany 

A large German machine tool plant, quite as carefully 
organized, laid out, and standardized, possesses rather more 
of a planning and dispatching system as we know it. Copies 
of the order and the bill of material are sent to all departments 
concerned and then a notification card — marked with a de- 
livery date and further classified as to urgency by marking it 



EUROPEAN PLANNING AND DISPATCHING 253 

in one corner with a large rubber stamp as "immediate," 
"ordinary speed," or "for stock" — is started as a sort of 
tracer. This card carries the schedule laid out in the planning 
department, in which a corresponding order of work chart 
is maintained showing the progress of the card and the work 
through the plant. (See Figure 43.) 

Each departmental foreman has his own office and is sup- 
plied with a clerk to relieve him of details so that he can 
devote most of his time to the workmen. He is further sup- 
plied by the rate-setting department with the time allowed for 
the work itself, and for setting up the machine — in order to 
emphasize continually the advisability of machining in as large 
lots as possible. One copy of the work ticket is forwarded 
with the work to the inspection department and eventually 
to the cost department for the purpose of figuring costs, which 
are kept on each order and on each machine on each order. 

The plant is so divided that each type of machine tool is 
manufactured in a separate department, where the machines 
are so grouped as to reduce transportation of work in process 
to the minimum. 

At another plant an interesting feature was the issue in 
duplicate of each work ticket, one copy of which went to the 
planning department. The move ticket, which followed the 
job through the shop, was issued with coupons attached which, 
when the work was started in one department, were detached 
and sent to the department next following to notify the fore- 
man as to what jobs would reach him next. 

Interest in Scientific Management 

Scientific management is at present interesting German 
engineers deeply. There is considerable literature on Das Tay- 
lor System and I found the staff of the Deutscher Ingenieure 
much interested in developments in other countries, about 
which they have known very little since 19 14. During her 



254 



AMERICA VS. EUROPE IN INDUSTRY 




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Figure 43. German Notification Cards and Order of Work Chart 



EUROPEAN PLANNING AND DISPATCHING 255 

period of isolation German industry seems to have developed 
rather along the line of selecting the man for the job, fitting 
him to it, and inculcating in him a respect for the organization, 
along educational lines, and along lines of mass production, 
rather than along lines of devising control systems with charts, 
planning boards, and printed forms exactly regulating each 
step of manufacture. With German workmen their policy 
certainly produces results, 

Italian Methods 

In one large Italian plant I found bills of material and 
work tickets but no signs of scheduling or planning. Inquiry 
developed the fact that "the inspectors walk around, see what 
is missing, and report it to the foreman, who orders it." Such \ 

a quintessence of casual management is not, however, the rule 
in Italy. 

The chief engineer of one of the largest organizations 
in Italy told me as we visited several of the company's plants, 
that they were using scientific management in all their plants — 
that they received from their New York office all literature 
issued bearing upon scientific management, and that they had 
two industrial engineers in charge of the work. Inspection 
disclosed the fact that, while they were working along the 
right lines, the installation was still in a very rudimentary 
state. Some time studies had been made and an embryonic 
sort of instruction card was set in a frame attached to each 
machine, but planning boards and like refinements were con- 
spicuous by their absence. Considerable standardization work 
had, however, been done. 

In a large shipbuilding plant I found that they were follow- 
ing the Hog Island system of assembling all the material for 
each ship before starting the work. The Italians are intensely 
interested in modern methods and are quick to grasp the value 
of a new idea. Large factories are so new a development 



256 AMERICA VS. EUROPE IN INDUSTRY 

in Italy, however, that hitherto most of their energy has neces- 
sarily been devoted to erecting efficient buildings, securing 
efficient tools, and working out labor-saving equipment — to 
the architectural and mechanical features. The next step will 
be the general replacement of casual by scientific management, 
to the necessity for which they are already thoroughly awake. 

Planning and Dispatching in England 

In the average plant in England planning and dispatching 
is very much as it always has been. This is due to three things 
— individualism, love of precedent, and suspicion on the part 
of powerful trade unions. Even in plants of modern con- 
struction the system of "visiting around in other departments 
to find out what the next job will be," is still in effect. One 
of the most efficient plants I visited, so far as physical equip- 
ment was concerned, was still operated under this system. 
Another more modern in some respects than anything we have 
in America had what they called a "production man." He 
had little or no system, but was a sort of king of the "stock- 
chasers" and was much harassed, I was informed, by the 
salesman, who insisted on going out into the plant and giving 
orders to the foreman, which upset any sort of a plan he had 
attempted to arrange. 

In one very large and modern plant, built according to 
American designs, I was told that the foremen were provided 
with copies of all orders and then "watched what was coming 
to them from the previous department." The plant, however, 
although it manufactured a somewhat diversified product, was 
laid out for mass production with substations for stock along 
the route of progress, so that the issuance of the stores requi- 
sition when each lot was put "in work" caused the parts 
required for each stage of the journey to be delivered at the 
point on the route where they would be used. The speed 
of progress, however, was regulated only by the delivery date 



EUROPEAN PLANNING AND DISPATCHING 257 

on the order. 4 Compared with some other British plants I 
visited, this plant was a marvel of efficiency, even though the 
speed of progress was not fixed by any sort of mechanism, 
either of the chain assembly or planning board variety. 

There are in England certain pioneers who have con- 
sciously installed scientific management and whose plants are 
marvels of efficiency, which equal, if they do not exceed, any- 
thing which has been developed anywhere else. In these 
plants standardization, planning and dispatching, and the like 
are so complete that an attempt to report the system in detail 
would result in a book as large as that of Colonel Babcock 
on Franklin plant methods for each. I shall therefore describe 
only the points of unusual interest, allowing the reader to 
conclude that methods not discussed are in accordance with 
the best principles of the true science of management. 

Dispatch Boards in a Chain Plant 

At a plant manufacturing transmission chains of all sorts 
the dispatch boards located in each department were arranged 
as shown in Figure 44. 

The squares represent pockets holding colored tickets, 
which indicate the amount of each material "in work" in each 
section of the department. Thus materials 1, 2, 3, and 4 are 
required for chain No. 467 and materials 3, 4, 5, 6, and 7 
for chain No. 468 and are processed in the department in the 
order shown by the letters A, B, C, and D. They eventually 
unite, either to form the finished chain No. 467, or to emerge 
from the department as a finished unit of such a chain. Suffi- 
cient material is delivered to the department to make the 
quantity of chains ordered. When the materials arrive in 



4 There is a certain parallel between this system and one of the German systems 
described. The fact must be kept in mind that German workmen are trained to work, 
to try to see how much they can do, while English workmen have been incited to 
hatred of their employers for so many years that they do as little work as possible. 
Furthermore, the trade unions are squarely on record against "payment by results" 
and individual output records. Inasmuch as most workmen are members of trade 
unions this automatically kills off any attempt at labor standardization by time study. 



2 5 8 



AMERICA VS. EUROPE IN INDUSTRY 



the department the quantity of each is written on a card and 
inserted in the proper material pockets — i, 2, 3, etc. As this 
material is processed the figures in the material pocket dimin- 
ish and appear in the pockets of the subsequent operation until 
each of the operations required in the department has been 
performed. 

The system may be likened to a lot of flow meters along 
a group of parallel water pipes, indicating the progress of 



Sample Finished Product g3=gs=g3 
Number «« <« C-467 





Material 
Number 1 



Figure 44. Departmental Dispatch Board in an English Plant 

the liquid in each part of each and insuring that the flow at 
each point is just adequate to fill a bucket (represented by 
the size of the order) at the other, at the exact moment it is 
required. The value of the board in regulating production 
will be evident at once to anyone familiar with the ebb and 
flow of production streams as the material in process of manu- 
facture passes from machine to machine. As a matter of fact 
the feed into the material pocket is usually steady, but the 
principle of the board's action is as described. 



EUROPEAN PLANNING AND DISPATCHING 259 

Each department, including the general storeroom, 5 is 
equipped with such a dispatch board. Each board is equipped 
with a telephone and the status of the board is reported to 
the statistical office daily and the results assembled directly 
on a Powers machine. The daily report is important as it 
saves an enormous amount of clerical work and makes it 
possible to balance actual accomplishment against the manu- 
facturing program planned for the plants as a whole. 

Movement of the material from one department to another 
is recorded by trucking it past the board. If the path of the 
trucker does not lie past the board as material is moved from 
one machine to another, the trucker reports the pieces moved 
to the man in charge of the board. As a result the board 
presents a true picture of the actual portion of all material 
in work in the department at all times as compared to the 
planned position. The boards, which are 8 or 10 feet high 
and 20 or 30 feet long, are usually located on aisles and are 
electrically lighted. 

Centralization vs. Control by Foremen 

When these boards were first used, some four or five years 
ago, they were considerably more complicated. The company 
suffered from "a bad attack of overcentralization," as the 
director expressed it. The central planning department was 
at first filled with clerks and an attempt was made to control 
everything from there. At present the department is more 
like the office which the industrial engineer establishes in a 
plant in America — an office doing analytical staff work and 
lending its assistance to any planning department needing it — 
rather than a department designed to direct all the details of 
planning. The departmental boards are in charge of the fore- 
man of the department who has his own dispatch clerk, time- 



B In this case the operations consisted of placing the order, arrival of the mate- 
rial, etc. 



2 6o AMERICA VS. EUROPE IN INDUSTRY 

keeper, and inspector. 6 The result of this is that the value 
of the foreman's experience, the value of the continuous 
personal contact between workman and foreman, and the value 
of the foreman's pride in the efficiency of his own organization, 
are utilized to the utmost. By this means, then, instead' of 
the shelving of the foreman, instead of jealousy and plant 
politics, and instead of important matters being decided by 
inexperienced clerks isolated in a central planning department, 
harmony, efficiency, and low production cost are substituted. 
It is good management and good psychology. 

Dispatch Boards in the Plant 

The same type of dispatch boards have been applied to the 
manufacture of safes (even less of a continuous production 
and more of a job production manufacturing activity, since 
each safe comprised some three hundred parts and was manu- 
factured in twenty-seven different varieties) and to various 
other uses. It is simple and effective and provides absolute 
control upon a basis of exact knowledge. 

In another plant manufacturing a diversified paper product 
the dispatch boards provided for even more detailed control. 
The boards were provided with horizontal tin slots. Into 
these slots — which were perhaps 8 feet long and 2 inches wide, 
each one of them representing a department, a machine, 
an operator, or a crew — were slipped cards, 2 inches wide, 
each one of which represented a job. These job cards — 
different colors to represent different board classes of work — 
were ruled vertically and each ruling represented .2 hours, 
or 12 minutes. When a job was entered on a card the 
card was cut so that its length represented the standard time 
allowed for the job. 

The divisional boards were equipped with a number of 
slots, each representing a department. In these departmental 



e This will be discussed more fully in the chapter on factory organization. 



EUROPEAN PLANNING AND DISPATCHING 



261 



slots the job cards (representing either a customer's order, 
or an order for stock) were inserted one after another, so that 
the sum of their length, placed end to end, showed the number 
of standard hours planned ahead for each department on the 
board, which was divided into days by lines painted vertically 
across its face. At the time of my visit work on these boards 
was being planned about two weeks ahead. The position of 
the job cards was altered each morning so that the left-hand 
space between the vertical lines on the board always repre- 
sented "today" and showed the amount of work ahead for 
each department. 

Standard Time 



Hrs. 



Time usually required by operator 

Figure 45. Job Card Inserted in Machine Slots on Departmental 

Dispatch Boards 

Each department was equipped with a similar departmental 
board where the jobs assigned the department from the divi- 
sional board were split up to machines, operators, and crews. 
On the department boards each horizontal slot represented a 
machine or a workplace. Into such machine slots, job cards 
(Figure 45) were inserted, corrected on a basis of each oper- 
ator's past efficiency. 

These cards were then lapped one over the other in the 
machine slots, so that the total overall length of all job tickets 
inserted in the machine slot represented the actual time which 
would in all probability be consumed in completing the jobs 
scheduled ahead to each machine. As each job was completed 
the actual time consumed was marked on the job ticket, which 
was used in the time office and then became a permanent record. 



262 AMERICA VS. EUROPE IN INDUSTRY 

Factory Order and Job Cards 

Full information in regard to the job is entered on a special 
factory order card. From this the job card used on the divi- 
sional board is made out. The factory order card, which is 
colored to correspond with the color of the job card, goes to 
the departmental board, where it is filed in a rack in front 
of the board in accordance with the date the order is required 
by the customer. As soon as the job is entered on a job card 
and placed on the departmental board, the factory order card 
is filed in a regular card index box according to order number 
and remains there until the job is completed. From this 
factory order card information of various sorts — such as the 
percentage of promises to customers fulfilled and like sta- 
tistical data — are compiled and entered on charts. 7 

When the job card on the departmental board indicates 
that a machine will be out of work shortly, exactly the amount 
of material the job calls for is delivered to the operator, who 
must deliver the full amount of finished product or explain 
the cause of spoilage ; in the latter case the reasons are recorded 
for statistical analysis. 

Other Installations of Scientific Management 

These are not the only plants in England .in which scientific 
management has been installed. There are also a number 
of plants in which the work is in the installation stage. In 
one plant standardization reduced over 1,200 sorts of con- 
tainers to less than 350. Standardization and planning in- 
creased the output of the factory over 70 per cent. In an- 
other an Elliott-Fisher tabulating machine had been arranged 
to fill in planning sheets with one impression in such a way 
that each department foreman was informed as to what had 
transpired in the previous department as well as what was 
planned for him. The stores requisitions were made with the 



7 See subsequent chapter on statistical control. 



EUROPEAN PLANNING AND DISPATCHING 263 

same impression on small detachable tickets, one set of which 
went to stores and the other to the manufacturing department. 

Another plant was using a tag system of dispatching sim- 
ilar to that used in some of the more ably managed factories 
in America making gloves, clothing, etc. The tag, marked 
with a serial number, accompanies the article and regulates 
its speed of progress, being checked off at each station (depart- 
ment or operator) against a typed list of "trains due." The 
tag is in some cases accompanied by a copy of the invoice to 
the customer, which accumulates the cost of each operation 
and eventually becomes a part of the permanent cost record. 
Another copy made out at the same time announces the receipt 
of the order to the shipping department. The original goes 
to the customer after shipment is made. Dispatching under 
this system is sometimes aided by the adoption of certain 
colored tags attached to indicate the date the work in each 
department is to be done. For example, a foreman finding 
a blue Monday tag on his department on Tuesday, when all 
tags were scheduled to be pink, would give the garment special 
attention. 

It would be easy to go on indefinitely with an account of 
planning and dispatching methods in use at home and abroad. 
We believe we have given enough, however, to indicate in 
a general way the state of this phase of industrial management. 
We have attempted to supply full enough detail in the case of 
the more marked variations from American practice to enable 
the administrator to grasp their fundamental significance and 
the engineer of experience in manufacturing to utilize the 
principles of the mechanism in building up the efficiency of 
industry. 



CHAPTER XI 

RATE-SETTING AND INCENTIVES 

Fair Work for Fair Pay 

"A fair day's pay for a fair day's work" — for once the 
slogan suits employer, employee, union official, social uplifter, 
and industrial engineer. All agree and harmony reigns until 
some practical person asks for "interpretations." 

As a matter of fact — in order to avoid just such explosions 
in industrial conferences — the United States Department of 
Labor has been trying for some years to determine what con- 
stitutes a fair day's pay. To that end its representatives have 
haunted the housewife from Kennebunkport to San Luis 
Obispo and have sought to ascertain statistically the habits 
and the expenditure of the working man — from the cost of 
his penchant for lurid mental pabulum to his outlay for beans. 

While progress of a general nature has been made, a 
careful analysis of the results of the investigation can lead 
only to the inevitable conclusion that the standard of living, 
like the standard of manners, depends upon geography, climate, 
and heredity. 

The fair day's work has proved even more elusive. Un- 
fortunately this has also been regulated principally by the 
laws of supply and demand operating in the labor market. A 
working man's conception of a fair day's work after he has 
been out of a job for six weeks and his family is half-starved, 
is entirely different from his idea as to the amount of work 
he should deliver when every employer in the country is bidding 
furiously for his services. Furthermore, the man who is afraid 
some commodity will spoil on his hands can demand neither 
the conditions nor the price as can the man who possesses a 

264 



RATE-SETTING AND INCENTIVES 265 

partial monopoly in something the world must have or perish. 
Until labor can be put in cold storage — like eggs — against the 
time when the demand increases, the laboring man will en- 
counter periods when he must sell his services cheap. At pres- 
ent the only way he can emulate the tgg profiteer and hold out 
for a better price for his services is by the practice of thrift, 
and unfortunately, though quite humanly, he is inclined to 
prefer silk shirts on the back to Liberty bonds in safe-deposit. 

Economic Aspects 

While such a condition is manifestly unfair, the search for 
a remedy should not be dismissed on the ground that this regret- 
table situation is a law of nature and therefore irresistible. 
Not only is it unfair to put the working man in the position 
of the fear-driven animal and unwholesome for the employer 
to regard himself as a castigator in the hand of Providence, 
but it is also uneconomical and unprofitable to the industry 
and to the community. 

Not very long ago the garment industries used to shut 
down at certain seasons to the serious loss of the manufac- 
turer as well as to the workman. Normal production was rep- 
resented on the chart by a series of peaks and valleys. The 
peak represented large profits and overwork and the valleys 
loss to employer and to employee alike. Similarly a series of 
peaks and valleys which represent a large amount of soldier- 
ing when the employer needs production and fear-haunted 
strenuousness, when the employee is afraid of being thrown 
into the street, promotes neither harmony, mutual respect, 
profitable production, nor low-commodity cost to the com- 
munity. 

A Proficiency Scale of Wages 

Not very long ago an employer of some thousands — a 
man who as a union official had once won labor's battles — 



266 AMERICA VS. EUROPE IN INDUSTRY 

described to me his system of paying his workmen. Careful 
records were kept of each man's daily output. The workmen 
were classified according to proficiency and quality and quan- 
tity produced — and standard rates of pay were established for 
each class. A man who fell behind his class was given sym- 
pathetic personal attention from the plant executives. Then, 
if within a month he did not measure up to his class again, he 
was dropped into the class below. 

At first glance this seemed an ideal arrangement. Each 
man was paid in proportion to what he accomplished, which 
was fair to the conscientious workman, since he received a 
greater reward than the loafer. Sympathetic assistance auto- 
matically became his when he encountered hard luck, so that 
he was not penalized if the fault was not his own — if it were 
due to unsatisfactory material, a machine in poor order, or 
lack of tools and accessories. If he needed change of work, 
medical assistance, or common-sense advice, he got it, since 
his case became the problem of the higher executives and 
their staff advisers if the foremen could not straighten out his 
trouble. He knew exactly what would happen to him under 
any circumstances which were likely to occur, so that his pros- 
perity did not depend upon the whims of some straw-boss. He 
was as nearly as might be his own master, since he knew the 
quality and quantity of product requisite to success quite as 
exactly as did the custom-shoemaker so often pointed out as 
the ideal contented craftsman of the industrial day which has 
vanished. 

But when my friend was asked how his firm knew what 
constituted the quantity and quality of work which a workman 
should produce in order to place him in the highest class, he 
had to admit that standards were set partly from a perusal 
of old records and partly according to the judgment of the 
various foremen. Nothing had ever been done to determine 
just what constituted a fair day's work. 



RATE-SETTING AND INCENTIVES 267 

Lack of Individual Production Standards 

Another man, head of a great industry whose business 
ideals — in spite of the fact that they seem to smack of the 
millennium to the usual "hard-headed American business man" 
— have been applied to his labor problems so practically and 
with so sure a touch that his cost of production remained al- 
most stationary during the war, and his labor turnover last 
year stayed at less than a fourth of that obtaining in the 
greatest and most advertised welfare experiment of the decade 
— told me that in his plant the scientific setting of standards 
of individual production was still a year off. Production 
throughout the plant was dependent upon the good-will and 
loyalty of his help. While the shop spirit was marvelous, 
not only was the shirker profiting at the expense of the con- 
scientious workman but the workman's method of forcing shop 
improvements and eliminating delays in manufacture was 
weak and ineffective, since it depended upon his ability to 
convince his foreman and that foreman to convince his supe- 
riors. 

All were good and conscientious men, perhaps, but 
unskilled in analysis, in the marshaling of facts, and in the 
presentation of a convincing written argument to the manage- 
ment. Wonderful as the plant was, the fair day's work was 
an unweighed, unmeasured unit and if a man was skilled in 
appearing busy or if he wore himself out galloping about an 
illy adjusted machine, he might receive the same rate as the 
man who was quietly efficient in his own work and in the ad- 
justment of his machine. 

Both these examples illustrate what is occurring in the 
most highly and intelligently organized and operated shops 
in America — the home of enterprise and efficiency. What 
then is happening in the majority of shops — in the shops which, 
like Topsy, "just grew," during the years in which our great 
corporations were born and attained manhood ? 



268 AMERICA VS. EUROPE IN INDUSTRY 

Personal Contacts in Former Times 

During the last two years the advertising columns of our 
newspapers have carried the illustrated life story of a man 
still living — of a man who as a six-year old boy was appren- 
ticed to a relative to learn a trade. In the last scene of this 
series he is carrying his raw material to his own factory in the 
evening, he is cutting up this material himself for his three 
assistants, and he is working with them in fashioning this 
material into the finished product. Under such conditions 
any workman who doesn't do a fair day's work hears about it 
long before the day's end. If he doesn't take a brace his wife 
is likely to hear about it that evening. On the other hand the 
boss learns at once of any interference with production. Indus- 
trial problems — whether of quality and output or whether 
social and economic — are met by employer and employee 
shoulder to shoulder. With such personal contact the fair 
day's pay and the fair day's work are determined as equally, 
as completely, and as harmoniously as is possible between 
human beings whose interests differ, but whose contact is so 
continuous and so intimate that a dirty trick on the part of 
either would probably result in a bloody nose for the perpe- 
trator, be he employer or employee, as well as in complete loss 
of the respect and of the position accorded him in the 
community. 

Bridging the Present Gulf 

In the industrial cycle which now exists, we have to bridge 
the gulf between the "dirty wop'1 who^alks intolthe western 
factory in the dark at 6 130 in the morning — one of 20,000 
known by a number — and the carefully manicured "chairman 
of the board" who steps from his limousine into a mahogany- 
paneled drawing-room in an elegant building at 10 '.30. Build- 
ing and maintaining this bridge is the work of the industrial 
engineer — be he executive, educator, or consultant. It's not 



RATE-SETTING AND INCENTIVES 



269 



a case for oratory, for invective, for stirring up class hatred, 
or for damning the world as an entity, but for action based 
upon facts. 

We do not purpose to discuss how much money a man 
must receive to be contented, since contentment is a matter 
of imagination and temperament, as anyone can prove to his 
own satisfaction by sitting on a park bench any pleasant Sun- 
day and comparing the expression on the faces of those who 
go by in Fords with those who go by in limousines. Neither 
do we intend to argue from a moral standpoint the question 
of the exact share of the profits due to labor and due to capital 
— provided there are any profits. Such matters are interest- 
ingly discussed by enthusiasts unhampered by experience or 
by facts and are eventually decided firmly and irresistibly by 
economic law. On the other hand the consideration of the 
best methods of determining a fair day's work and of reward- 
ing the workers fairly is an engineering problem. Upon its 
solution depends the success of bridging the gulf which has 
arisen between the owner and the workman. For when all is 
said and done the most sensitive points of contact between 
master and man are wages and personal treatment. Welfare 
work and low wages don't go with the workman any more 
than do current wages and a raw deal. He saves his loyalty 
for the place where he gets both good wages and decent treat- 
ment. We can only reproduce the harmony and efficiency of 
the bygone era by the use of methods which insure quite as 
quick a reaction from the boss when good work is done or 
when difficulties are encountered by the workman, as were 
possible when the boss worked shoulder to shoulder with his 
three helpers. 

Stockholders and Scientific Management 

The man who really controls the industry of the present 
day holds his power on sufferance from a mass of stockholders 



270 



AMERICA VS. EUROPE IN INDUSTRY 



interested almost exclusively in the size and frequency of the 
dividends that "the property" — which to them means princi- 
pally the assets in the form of real estate, buildings, and ma- 
chinery — can be made to earn. "Organization," "efficiency 
of operation," and "loyalty of personnel" are meaningless 
terms to the usual stockholder, who sums such things up under 
the vague term of "good management." One reason why 
scientific management has made such slow progress has been 
due to lack of sympathy on the part of stockholders with ex- 
penditure for any asset that is non-mortgageable. Another 
thing that has hampered the development of the most effective 
management is the total lack of realization upon the part of 
stockholders and directors that high-priced executives and 
high-priced workmen are not only cheapest in the end but are 
absolutely indespensable if maximum profits are to be main- 
tained. 

Incompetent management — which has been blamed by our 
more skilled industrial analysts for most of our late industrial 
ills — is usually the result of narrowness and lack of education 
on the part of the stockholders. In order to secure reforms 
it is just as necessary to educate an incompetent manager's 
constituency as it is to educate an incompetent senator's con- 
stituency under similar circumstances. That is why it is the 
duty of the men who know — of earnest idealists of actual in- 
dustrial experience — to take advantage of every opportunity 
to impress upon the public the conditions which actually exist, 
if unwholesome and selfish propaganda is to be defeated in 
its attempt to refashion industry to suit its own fads and its 
own nefarious ends. We are an industrial nation and the 
personal prosperity of each of us depends upon the effective 
management of our large industrial units. Therefore the 
burden of spreading the true word rests upon each skilled 
and far-seeing industrialist, be he executive, engineer, or 
educator. 



RATE-SETTING AND INCENTIVES 



271 



The Day- Wage System 

As industry grew up from the four-man shop it continued 
to pay its help by the day. This worked very well in the 
early cycle of industry, while the owner continued to work 
shoulder to shoulder with his men. As industry grew the day- 
wage method was retained because it made accounting easy. 
Men could be herded through a gate presided over by a gimlet- 
eyed time-keeper reinforced with a battery of time-clocks, and 
the stockholders had positive assurance that each numbered 
workman spent ten hours within the fence when the annual 
audit had been made by the public accountant. Where a fence 
was too expensive, periodic descents upon the working crews 
during the morning and afternoon by a similar gimlet-eyed 
time-keeper armed with a large book in which he solemnly 
checked as present each man whom he could see, or whom 
he suspected was present, furnished an equally auditable 
record of each workman's presence within the precincts of 
the industry. 

Many years ago it fell to my lot to compile such a time 
record daily. After about three trips through the works hunt- 
ing an invisible man, the assurance from a foreman or from 
a fellow-workman that the missing Bill Spivens had been 
seen about the factory that morning was sufficient evidence for 
me to certify that he was working honestly, efficiently, and 
continuously, and therefore was entitled to pay for such ser- 
vice. Interviews with some dozens of time-keepers since have 
convinced me that I was unusually conscientious. 

Some years later a careful survey lasting a week, during 
which a trained engineer made a round of a group of shops 
every twenty minutes disclosed the fact that 20 per cent of 
the men carried on the pay-roll and carefully "checked in" 
every morning and out every night, never could be found. At 
first we thought that someone was benefiting from a padded 
pay-roll, but further investigation ultimately convinced us that 



272 AMERICA VS. EUROPE IN INDUSTRY 

this 20 per cent simply represented the men wandering from 
place to place, getting a drink, enjoying a smoke in the wash- 
room, or engaged in some other non-productive activity. Men 
on night work in a large shipyard had this sort of thing so 
thoroughly organized that certain men were delegated to 
watch for the approach of those in authority, and others 
assigned to making a noise like men working, pounded 
lustily on the hull of the ship under repair, while the majority 
played cards and passed the beer. 

While such may be exceptional cases, the fact remains 
that the most expert and conscientious foreman can be in only 
one place at a time, and if he has ten crews at work in ten 
different places the chances are just ten to one that under the 
day-wage system the men under him will win in the grim game 
of "take it easy while the boss isn't looking/' The only excuse 
for the day-wage system is easy bookkeeping. As a method of 
measuring time spent in the works it is eminently successful. 
If the idea is to measure time served there is no criticism. 

Supervision Under Day-Wage System 

When the workman-owner retired to a private office in the 
corner of the shop he made his best workman a foreman. As 
the business grew he appointed from the better of his em- 
ployees general foremen, shop superintendents, general super- 
intendents, work managers, resident managers, general man- 
agers, and eventually fetched up, himself, in New • York as 
chairman of the board. Supervision of the workmen was left 
to the lowest class of foremen. For obvious reasons men of 
the caliber of the owner have not stayed in the foreman class. 
That is one reason why when men of education brought their 
attention to bear collectively upon the foreman problem early 
in the war the first result was wholesale abuse of the foremen 
as the "petty czars of industry." 

Be that as it may, the supervision of the men working under 



RATE-SETTING AND INCENTIVES 



273 



the day-wage system was left to the most poorly equipped of 
all the industrial executives. Under this system, besides, since 
the foreman can spend on an average only about 6 minutes out 
of every hour with each of his ten crews of men, each crew 
can do very much as it pleases during the other 54 minutes 
out of each hour. And, being human, each crew does as little 




Figure 46. Unstandardized Piece Work 

The difficulty is due to the fact that there is no "reservoir from which to take work." 

As a result four men are standing idle waiting for pipe to come down the slide. 

Two men are working. Result 33 per cent efficiency. 

work as possible and keeps a weather eye out for the fore- 
man. The foreman, having been a workman himself, knows 
all about this and devises unexpected courses of approach and 
seeks points of vantage from which he can spot the loafers. 



Evils of the System 

Under the day- wage system the one weapon of the fore- 
man is fear. When he is criticized for high cost of produc- 



274 



AMERICA VS. EUROPE IN INDUSTRY 



tion or because the general manager in his majestic progress 
through the works has discovered a loafer, his only recourse 
is to speed up on his footwork, to roar at his men in a more 
terrifying key, and to fire a man here and there picked from 
the mass. 

Under day work the relation between employer and em- 
ployee becomes a grim game. The employer says, 'Til pay 
you so much a day — for 10, 9, or 8 hours of your time. I'm 
going to get all the work I can out of you in that time. If 
you can loaf without my catching you, you win. If I catch you 
loafing you lose — your job." Which wins — with the odds 
ten to one against the foreman? But the worst of this game 
is its unfairness. The lazy loafer gets just as much pay as 
the hard worker. A premium is placed on laziness. The 
best bluffer rather than the most effective worker wins. 

The foreman becomes a jailer. He goes roaring through 
the plant trying to scare the men into working. He unjustly 
accuses men of loafing. After a little the workman hates 
the foreman. He hates the employer whom the foreman rep- 
resents. He becomes fertile ground for the seed of com- 
munism. It's not the foreman's fault. He hasn't been taught 
any better way. The employer is really to blame, although 
he has probably been so busy trying to keep his head above 
water under such methods, and trying to beat his competitors 
in a world market of increasing complication that he hasn't 
given the matter attention, and hasn't found out that better 
methods have been invented. 

Piece Work — Rate-Setting by Bargaining 

To get away from this sort of thing piece work was in- 
vented. The theory of piece work is excellent. The employer 
is to pay in proportion to the work done. No supervision 
except inspection for quality is required. The hard worker 
will be rewarded and the loafer will eliminate himself by starv- 



RATE-SETTING AND INCENTIVES 275 

ing to death. The worker will invent new methods of work 
in order to make more money and for the same reason he 
will keep his machine and tools in the best possible order. 

Unfortunately the ordinary type of piece work breaks 
down in actual practice owing to the difficulty of setting piece 
rates. The rate set is usually the result of a bargain between 
the employer — represented by a foreman- — and the employee. 
The boss wants the rate low, the workman wants it high. The 
man wants to earn big wages with little effort. Furthermore 
he wants to protect himself against loss of output due to ma- 
chine breakdowns, power shutdowns, lack of material, lack 
of proper tools, and lack of clear instructions. Furthermore 
he doesn't want to work himself or his friend out of a job. 

If the workman makes a good bargain and is foolish enough 
to let himself out to full speed he is likely to earn about double 
the average shop rate. The reason for this is that the fore- 
man's idea of how much is to be turned out is usually based 
upon what he himself used to do in the dim past when he was 
a workman, or upon what he has observed some other work- 
man do — said workman being a "wise guy" who knows the 
boss is watching him. The inevitable result, if the workman 
is innocent enough to let himself out, is that the foreman is 
sore because : ( 1 ) he is afraid that Jones's big pay will make 
Brown jealous, (2) he is afraid Jones will make so much 
money he won't work more than two-thirds of the time, and, 
principally, (3) he knows from past experience that he him- 
self will get the devil as a poor rate-setter from the works 
manager to whom the inevitable jealous time-keeper has car- 
ried the story of Jones's big killing. 

Cutting the Rate 

Therefore he cuts the rate. As a result Jones has to work 
just as hard as he did in the first flush of his innocent spurt in 
order to make barely enough to live on and his friends comfort 



2j6 AMERICA VS. EUROPE IN INDUSTRY 

him with — "Ya poor fish! Ya oughta' known better than to 
give a good thing away !" 

This is not an exaggeration. A woman I knew invented 
a hammer with which she could drive a nail into a packing case 
at a single blow. She could have made three times the average 
daily income under the prevailing piece rate. She told me 
she did not dare make more than 10 per cent above prevailing 
rates. In another plant where I was working, a man at a 
lathe sold to his successor for $17 the completed pieces he had 
hidden under a bench, which he had finished but did not dare 
turn in. In the same plant a workman one day invaded the 
rate-setting department with the astounding assertion that 
his rate was too high — that it should have been 3 cents per 
piece instead of 12^4 cents — "and the reason I'm tellin' ya, 
is because I'm quitten' tonight, and I got it in for the fella' 
who's followin' me on the job!" The rate was cut by the 
antediluvian relic who presided over the rate-setting depart- 
ment and the "fella' who followed" made about $7 a day! 

The result of rate-setting by bargaining and rate-cutting 
to conceal the poor guess can only be hypocrisy, distrust, and 
mutual dislike between employer and employee, ending in 
labor unrest and in strikes. 

Bonus Plans 

To get away from the evils of the poor guess as to what 
constitutes a fair day's work, certain bonus plans were devised 
which split the surplus, over and above the current earnings, 
between employer and employee. The idea of these schemes 
was to reduce the incentive on the part of the employer to cut 
the rate. At the same time the theory was humanely advanced 
that the employee would not work harder than was really 
good for him if he received only half -pay for his extra effort 
or for his extra inventiveness. Unfortunately for the complete 
success of such schemes the American workman — who has the 



RATE-SETTING AND INCENTIVES 



277 



most highly developed code of what constitutes a fair deal 
of any class in the world — cannot see the reason why, if he 
does twice as much work, he should not receive twice as much 
pay. Furthermore, under such schemes the workman must 
largely fight through his innovations alone, and he is primar- 
ily a workman not a fighting man. 




Figure 47. Type of Men Working Under a Bonus System Based on 
Quality of Product, Man-Hours Expended, and Coal Saved 

They used technical instruments and recorded the results obtained on the charts 

provided. In spite of what would ordinarily be termed a "complicated" system, they 

accomplished exactly what was asked of them and earned from 20 to 30 per cent more 

than men working under unstandardized conditions. 

Rate-Setting by Scientific Analysis 

Then came the great innovation — the exact predetermina- 
tion of the fair day's work by means of a scientific analysis 
of all the elements that enter into and limit the production of 
a given quality of goods from a given material under existing 
or attainable methods of manufacture. We do not propose 
to enter into a discussion of the methods used in applying the 
scientific method to the determination of the fair day's work. 



278 AMERICA VS. EUROPE IN INDUSTRY 

That has been fully and ably covered in the works of Frederick 
W. Taylor, H. L. Gantt, Frank Gilbreth, Harrington Emer- 
son, and of the men who followed their lead. For our purpose 
it is sufficient to state that the amount of work a man should 
do under given conditions can be and is daily being determined 
in the largest and most effectively run plants in America, Eng- 
land, and France. The best argument against scepticism is 
the fait accompli. If you don't believe it go and see it done ! 
Such analysis is made most commonly by means of the 
stop-watch, which is simply a mechanism for the convenient 
collection of facts. On certain sorts of work an analytical 
study can be made without the stop-watch. But it must be 
made by a trained observer working on the job — not by 
averaging past records, from data half-recollected by a former 
workman, or by the casual and untrained observation of a 
foreman. Furthermore it must be made impersonally — from 
the standpoint of a disinterested party. Bias on the part of 
a time-study man is as unthinkable and as destructive of 
results as bias would be upon the part of a chemist. He 
is simply a collector of facts. 

Opposition to Stop- Watch 

The mistake made by those misguided individuals who 
herald the stop-watch as the bludgeon of the capitalistic 
monster, used only to drive the exhausted wage slave to one 
further gasping spurt before he drops in his chains, is that 
they assume that it is as irresistible as a 44 automatic in the 
hands of one of the masked gentleman occasionally encount- 
ered on the dark side of the street in our large cities and that it 
can be and is used in exactly the same way. Nothing is more 
ridiculous. Pointing out a watering-trough to a horse and 
inducing him to drink are entirely different matters. Under 
such circumstances the horse and the working man act when 
they feel it is to their advantage to do so — not before. Co- 



RATE-SETTING AND INCENTIVES 



279 



operation and trust are just as essential in one case as in the 
other. 

Of course, if a man is a communist, if he believes that 
the present social order must be destroyed and built up anew, 
if he believes that society must be Bolshevized, he prefers 
that nothing which will assist industry to exist as at present or- 
ganized must be countenanced. If he believes that labor and 
capital are necessarily at war in all things and will continue to 
be so long as they shall survive, he wages war at every oppor- 
tunity against methods which tend to increase the operating 
efficiency of industry. 

For instance, a member of the Fabian Society in England 
stated at Oxford : 

There should be no "efficiency" system unless there is a 
really strong intelligent control by the workers in the work- 
shop. I do not think the relations of labour and capital will 
be improved after the war, and I hope they will not, because 
I believe in the class struggle and regard their interests as 
irreconcilable. Any system which supposes co-operation be- 
tween capital and labour will break down. 

Justification of the Stop-Watch 

On the other hand, Secretary of Labor Wilson, in 19 18, 
after stating that he believed in organized labor, analyzed the 
matter of production as follows : 

Labor and capital have a mutual interest in securing the 
largest possible production with a given amount of labor, 
having due regard for the health, the safety, and the property, 
and for the enjoyment of the workers themselves. If we 
produce nothing, there can be nothing to divide. If we 
produce a large amount there is just that much more to 
divide. And the interests of the employer and the employee 
diverge only when it comes to the point of the distribution 
of that which has been produced ; and if they are wise busi- 
ness men instead of resorting to strikes and lock-outs, and 
thereby limiting production, they will sit down around the 



280 



AMERICA VS. EUROPE IN INDUSTRY 



council table and work the problem out on as nearly a correct 
mathematical basis as the circumstances surrounding the 
industry will permit. 

This to my mind is the saner viewpoint. One of the most 
significant points in Secretary Wilson's statement is his plea 
for solution based upon an analytical and unbiased examina- 
tion of the facts in each case. 




Figure 48. Standardized Bonus Work 

The men are free to let themselves out. No ennui here. 

How are you going to examine the facts and work out the 
problem upon "a correct mathematical basis" if you don't col- 
lect these facts? If you are going to collect facts why scorn 
the best means yet invented for collecting the facts about 
which most industrial controversy centers — the analytical time 
study? It is absolutely inconsistent to state that it is perfectly 
proper to ascertain a fair day's work and then turn around and 
pass laws forbidding the use of the most accurate mechanisms 
yet devised to determine the amount of work that may fairly 
be expected from a normal man without injury to his health. 

It would be quite as consistent to tell a man you will give 



RATE-SETTING AND INCENTIVES 2 8l 

him an indefinite "bunch of money" for his day's work and 
then expect him to be pleased with what you feel like passing 
out to him on pay night. Why should it be fair for the work- 
man to deliver an indeterminate "bunch of work" for exactly 
measured money, while it would be considered most unfair for 
the employer to pay for an exact amount of work with an 
indeterminate "bunch of money"? There is just as good 
reason for having the amount of work accurately measured 
and known beforehand to both parties to the agreement as 
there is in having the amount of money accurately measured 
and known beforehand. 

Individual Viewpoints 

If a man rushes into print with an attack upon the analyti- 
cal time study, it is generally safe to assume either that he has 
never actually worked in a factory, or that he is communistic, 
or that he is courting popularity from some special constitu- 
ency which he feels is opposed to any method tending to pro- 
mote mutual harmony and understanding between employer 
and employee. If I were a politician and believed that the 
American working man was inherently a loafer and that the 
only way I could hold my job was to pander to his baser in- 
stincts, I should shout for everything that would promote the 
delivery of the least amount of work in the working day. If 
I were a Bolshevist who believed that the present form of 
industrial civilization should be wrecked in the shortest pos- 
sible time for the good of humanity, I should cheer every aid to 
systematic soldiering, and I would attack every aid to produc- 
tion at every opportunity. If my bread and butter depended 
upon the fomentation of industrial strife I should fight to 
the bitter end every method and every mechanism which tended 
accurately to determine the fair day's work, and which would 
thus place workmen on an equality with each other and tend 
to release labor from fear of the boss. 



282 AMERICA VS. EUROPE IN INDUSTRY 

But such is not the position of enlightened employers or 
of enlightened employees — organized and unorganized. The 
fair day's work is being determined accurately and scientifically 
in industries of all sorts, in closed shops, open shops, unorgan- 
ized shops, and under industrial democracy. Union shop com- 
mittees are holding the stop-watch and are placing their O K 
on standard production times. When the duly elected repre- 
sentatives of the workmen pass upon the fairness of a standard 
fair day's work — when they themselves hold the stop-watch 
and even in some cases voluntarily propose an increase in the 
standard performance — what further evidence can be desired 
as to the inherent Tightness of the principle of arriving at the 
fair day's work by the most accurate means available? 1 

A Statement by Samuel Gompers 

Samuel Gompers, President of the American Federation 
of Labor, in a very remarkable article in System (April, 1920) 

says: 

Having fixed upon the minimum amount of work we are 
to take into account that all men are not equal, and there is 
no suspicion in the union doctrine that all men are equal 
in ability and / should therefore arrange to pay my people 
in proportion to the amount of work they did above standard 
— not at all in the way of a "bonus," not as a gift, and not 
charitably, but with a mutual recognition of the fact that if 
prices are calculated on the man doing 10 articles per day, 
if he then does 20 articles a day the employer can well afford 
to pay the worker who produces 100% more, 100% more 
wages, because the overhead expense remains just the same. 
This is a principle recognised by most industrial engineers 
and it is perfectly fair to all parties. 

There is an impression that the unions are against machin- 
ery, are against the better ways of doing business, are 
against scientific management, and in favor of stringing out 



J In the garment industry in Cleveland industrial engineers were hired jointly by 
the union and by the employers in 1919 to determine exactly what constituted a fair 
day's work. 



RATE-SETTING AND INCENTIVES 283 

every job to the greatest possible extent. That, it is true, was 
the attitude of the old country. It is not the attitude of the 
American Labor Movement. 



"Speeding Up the Worker" 

Academic attacks upon rate-setting by analytical methods 
are usually due to ignorance of modern industrial shop con- 
ditions. The parlor Bolshevist or the uplifter, never having 
done any manual labor except such chores as have been done 
about .the house or on a camping trip, resulting in blisters and 
backache, imagines that all factory work is performed by main 
strength and awkwardness and consists of heavy lifting, pull- 
ing and pushing. 

As a matter of fact, only a very small proportion of mod- 
ern factory work is at the same time heavy and fast. With 
the development of machinery, quickness and dexterity have 
been more and more required. Heavy work is almost entirely 
done by machinery, the operative merely turning off and on the 
power, guiding the material, or preventing something going 
wrong with the machine. About the last thing an analytical 
time study does is to "speed up the worker" in the sense in 
which that overworked phrase is usually employed. It is more 
likely to be the management that is jolted when, the analytical 
study is finished. 

To illustrate what I mean — some years ago some engineers 
associated with me ran a lot of analytical time studies in order 
to test the general efficiency of operation of certain depart- 
ments in an automobile plant. Of a dozen such studies selected 
at random from my notes only one example of inefficiency 
brought to light required quicker work on the part of the oper- 
atives. This was one which showed output being delayed 
by slow and inefficient trucking. There was one case of lack 
of material to complete an order which had been started, 
making it necessary to change the job and the set up of the ma- 



284 AMERICA VS. EUROPE IN INDUSTRY 

chine. In other cases output was lost by wrong machine 
adjustment, by improper gauging, by the improper placing of 
raw material, or of trucks, or of machines. Congestion of 
material interfered with output. Unnecessary handling was 
being done by operators. High-priced operators were stopping 
their machines in order to clear away scrap which should have 
been taken away by low-grade laborers. Machine operators 
were even doing their own trucking while their machines stood 
idle. 

Responsibilities of Management 

Who was responsible for improperly planned trucking or 
an improperly manned truck — the machine operators who pos- 
sessed no authority whatsoever, or the plant management? 
Who was responsible for the poor material control system — 
the men or the management ? Who was responsible for high- 
priced men having to stop the machines and do low-grade 
work — labor or capital ? 

In the face of such disclosures as this, whose duty was it 
to get busy and "speed up" ? Was it the duty of the men or 
the management? 

Harrington Emerson once told me that an examination of 
some 40,000 records of workers whose efficiency rose on an 
average of 70 points disclosed the fact that 50 of the points 
were secured by the betterment of conditions, and the other 
20 points by the improvement of individual methods. These 
results, he said, were gained not by the speeding up of work- 
men, but by the improvement of methods — better tools, in- 
struction in better methods of work, and the like. My own 
experience leads me to believe that this was a very conserva- 
tive statement. Analytical time studies are much more likely 
to show up the management than the men. 

We have already discussed in previous chapters the neces- 
sity for standardization, systematic planning, dispatching, and 



RATE-SETTING AND INCENTIVES 285 

the like. The point we wish to make here is that such aids 
must be given the men by the management before the men 
can be expected to do a fair day's work. 

We must remember that there is nothing so discouraging 
as to make an intense effort to accomplish something and then 
— through no fault of one's own — to have such effort come 
to naught. It is the duty of the shop management so to stand- 
ardize conditions that the workman is given a fair opportunity 
to earn the extra money offered for extra effort. How can 
the workman be expected to give special attention to the 
quality of his output if, after a morning spent in closely watch- 
ing the product, taking every pains to maintain the standards 
of quality desired, by afternoon raw material is delivered to 
him of such quality that he loses all he gained by his extra 
effort in the morning? Or how can a workman be expected to 
jump into quantity production with zest the day after his 
extra effort to make a good showing came to naught because 
his machine broke down? When we buy oil stock or take a 
flyer in real estate we try to be good sports when we lose. 
When we buy Liberty bonds we emit a terrible howl if we 
lose either principal or interest. Similarly the workman is 
willing to take his chance in a raffle, but when he delivers 
honest effort, he feels swindled if his reward is lost to him 
through the intervention of something beyond his control — 
such as defective raw material or a poorly repaired machine. 

Standardization vs. Choice of System 

A great deal of good print-paper and many pedagogical 
man-hours have been expended in discussion of the exact type 
of bonus system best fitted to deal out to the workman the 
extra money for his extra effort — to reward him for the extra 
attention he devotes to following instructions in order to main- 
tain standard output and quality. There is something about 
the graphs illustrating the Day-Work, the Straight Piece 



286 



AMERICA VS. EUROPE IN INDUSTRY 



Work, the Rowan, the Halsey, the Taylor, the Gantt, the 
Emerson, and similar systems of payment which seems to 
fascinate the cloistered casuist. He can retire to his study, lock 
the door, turn on the green lamp, and then draw curves and 
discourse learnedly upon the relative fairness to the working 
man of each system, • without fear of interruption or contra- 




Figure 49. Another Example of Unstandardized Piece Work 

The difficulty here is that there is no "reservoir in which to put work." The dumping 

place — at the end of a single plank — was occupied by a third man. Therefore these 

two men could not get rid of their loads. Result 33 per cent efficiency. 

diction, until he has proved to his own satisfaction exactly 
which one will produce the exact form and quantity of reward 
most likely to produce a feeling of content in the mind of the 
working man — as he imagines him. 

As a matter of fact, it does not greatly matter which sys- 
tem is used — provided enough standardization work has been 
done to insure the workman being paid in proportion to the 
effort he expends, provided the amount and quality of work to 
be done per hour is set only after a sufficiently careful analytical 
time study has been made to determine how much of the par- 



RATE-SETTING AND INCENTIVES 287 

ticular type of work a normal operator can do year in and 
year out, without injury to himself, and provided the workman 
is guaranteed a fair remuneration in case of serious interrup- 
tion in output by factors beyond his control. 

Each system has its advantages. There are some jobs 
which must be paid for by day work, although there are very 
few — much fewer than is commonly supposed — for which 
some form of reward for honesty, loyalty, and efficiency can- 
not be devised. 

Some Features of Piece-Work Systems 

Standardized piece work is probably the simplest for every- 
one concerned to understand. Its fairness depends upon the 
accuracy with which the quantity and quality output per hour 
has been determined. The Rowan and Halsey plans work very 
well if the burden of standardization of working conditions 
and the analytical determination of what constitutes a day's 
work are assumed by the management. The Taylor differ- 
ential piece-rate system emphasizes the attainment of the pre- 
determined day's work by paying a higher rate per piece if the 
standard is attained. The Gantt system puts a similar emphasis 
upon the attainment of the standard set but protects the worker 
against loss by guaranteeing him a certain minimum daily 
income. 

The Emerson system is less severe inasmuch as it not only 
guarantees the daily income but begins to reward the workman 
for extra effort expended before the full standard is attained. 
Some curves have been criticized because once the standard 
is reached the payment per piece produced begins to decrease, 
the critics holding that the employer can afford to pay full piece- 
work price regardless of how high production soars since he 
reduces his total cost of production, because of the division 
of the constant overhead charges, by the greater number of 
pieces produced. Engineers who have actually installed these 



288 AMERICA VS. EUROPE IN INDUSTRY 

bonus systems know that there are certain sorts of work — 
pure physical speed jobs — where it is humane to discourage 
the hourly production beyond a certain point. Under such cir- 
cumstances a reduction in the piece rate when more than a 
certain number of pieces are produced tends to discourage the 
type of man who doesn't care what he does to himself so long 
as he increases the thickness of his pay envelope. 

It has been found necessary in some cases where the 
differential piece-rate type of system has been installed to 
make what are called "high" and "low" premium rates. For 
instance, under the original system a man making boxes would 
be paid 10 cents apiece for them if he makes the predetermined 
standard of 50 per day, but only 5 cents apiece if he makes 
less than 50 per day. In order to encourage him not to slump 
back to 20 a day if he sees he is not going to be able to make 
the full standard of 50 — and so perhaps upset carefully laid 
plans and waste machine capacity — it has been necessary to in- 
troduce an intermediate rate, of, say, 7 cents a box, which he 
is paid if he fails to attain the full standard of 50 per day 
but manages to make 40 per day. As soon as you begin to 
do this sort of thing you begin to spoil the simplicity of the 
differential piece rate and you might as well adopt the Emerson 
system entire and secure its various advantages. 

Explaining and Installing Systems 

An assistant of mine who had set a great many rates under 
both systems sized the matter up this way : 

It's easier to go out in the shop and explain to a workman 
that if he makes 50 boxes a day he will get 10 cents apiece 
for them, but that if he makes less than 50 boxes a day he'll 
only pull down 5 cents apiece for them. That's easy to say 
and easy to understand, and if he counts his boxes from 
time to time during the day and watches the clock he knows 
just where he stands all day and how much he has earned 
when he goes home. The trouble is getting him to believe 



RATE-SETTING AND INCENTIVES 289 

he can make 50 boxes a day when he has been making only 20. 
It doesn't seem possible to him — and he's got to make the 
whole increase in one jump or he doesn't make any premium. 
Probably he tries hard two or three days and because he 
doesn't make the '50 he doesn't get anything for his extra 
effort. He gets discouraged and says, "To hell with the 




Figure 50. A "Technical Man" 

He could not speak English, but he learned to operate 
the Seger gauge he is carrying and he learned to read 
graphs and to enter readings from various technical 
instruments and notes as to the progress of the work 
upon the record sheets. 

premium." Then you've got to do an all-fired lot of persuad- 
ing and showing and encouraging before you can get him 
to go after it again. 

With the percentage of efficiency system, it's pretty hard to 
get it over to the workman that he's going to be paid accord- 
ing to his efficiency and that if he attains 100 per cent and 
makes 50 boxes a day he will get 20 per cent bonus added to 
his day rate of $4. He doesn't understand what it is all about. 



290 AMERICA VS. EUROPE IN INDUSTRY 

But at the end of the first day when you tell him he has made 
40 boxes and therefore is 80 per cent efficient and has 12 cents 
extra coming to him on pay day he takes a mild interest 
and can be persuaded to try again. The next day he makes 
42 boxes, is 84 per cent efficient, and earns 20 cents bonus. 
This persuades him really to try. He makes 48, is 96 per 
cent efficient, and earns 64 cents, and by the end of the week, 
having averaged 90 per cent efficient, he pulls down an extra 
10 per cent in his pay envelope and after that he believes 
you are a "regular guy" and is for you whether he under- 
stands you or not. After that you can fix him up a little 
chart on the wall which shows him every day how near he 
is hitting the green line marked "100 per cent" and he is 
sold on the proposition. You've done it all so smoothly and 
painlessly he didn't know he was working hard until the 
money was coming in — and from the time he got that first 
pay envelope he was for it. It looks to me as if the chief 
difference between getting a man up to standard with the dif- 
ferential piece rate and on the bonus system is about the 
difference between telling him to jump up onto a box 4 feet 
high with one jump and giving him a step ladder and telling 
him to climb up. He may shy at the ladder at first but mak- 
ing the jump is a lot more painful for everybody. 

Gauging Plant Efficiency- 
One of the great advantages of the percentage of efficiency 
system is the opportunity that it furnishes to gauge the exact 
efficiency of the whole plant. If the foreman of the depart- 
ment knows each morning just what percentage of the standard 
quantity and quality of production each man has turned out 
the day previous he knows by averaging these percentages, 2 
just how efficient his department has been. If the plant super- 
intendent knows the average percentage of efficiency attained 
by the departments for whose operation he is responsible, and 
the efficiency of each department, he knows which departments 



2 The determination of a department's or of a factory's efficiency as a whole is not 
as simple as this but I wish to avoid fogging the issue by a long digression into 
weighted averages and similar details. 



RATE-SETTING AND INCENTIVES 



291 



need his personal attention. If the general manager knows 
each day or every week just which plants are falling below 
reasonable standard of efficiency and just how much, he knows 
whether or not it is safe for him to throw his entire energies 
into the stimulation of the sales department, the refutation of 



i 


Week Ending 

Dec. 

3 10 17 24 31 


Jan. 

7 14 21 28 


Feb. 
4 11 IS 25 


Mar. 
3 10 17 24 31 


Apr. 
7 14 21 28 


May 
5 12 19 26 


110 
100 

DO 
80 
70 
60 




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Figure 51. A Typical Result of Placing a Crew on Bonus 

Note the initial efficiency of 67 per cent, the slight improvement due to the presence 

of the engineer, the slump when the crew is first left to its own devices, and in 

January the growing conviction that the standard is reasonable, followed by an average 

cf attainment of 100 per cent in March. 

certain allegations dropped by the Attorney-General's Office, 
or golf, or whether he'd better drop all for a rush visit to one 
of the factories. 

Furthermore, with standards for quality and quantity 
scientifically and fairly set throughout the plant each man 
knows that he and his department are getting a systematic and 



292 



AMERICA VS. EUROPE IN INDUSTRY 



impersonal "once over," based upon cold facts at regular 
intervals all the way up the line. There is no starch for a 
man's backbone like the knowledge that he will get all that's 
coming to him — good or bad — for everything he does. If 
you don't believe it think how many men during the last 
couple of thousand years have stayed in the narrow path be- 
cause they believed in hell-fire and a bluff-proof recording 
angel and how many women have done the same thing because 
they believed in heaven and the same impartial and all-seeing 
secretary. 

Fairness and Need of Rate-Setting 

The determination of standard times for each job is a 
requisite for accurate planning and for prompt delivery to the 
customer. How could Benjamin Franklin have promised a 
job of printing without some idea of how long it would take to 
complete the work he had in the shop and how long it would 
take to complete the new job? With the growth of industry, 
how much more necessary has become the need for standards 
of output for each machine and each man ! Since wages are 
what induce most of us to work, rate-setting and. rewards, 
based upon what each of us can turn out comfortably — and 
without injury to our future health or the future health 
of the race — are not only necessary but fair, fair to the work- 
man, to the executive, to the stockholder, and to the com- 
munity. "A fair day's pay for a fair day's work" is the 
slogan. Let us face the situation with common sense and 
adopt every measure and every method that will substitute 
facts for phrases whose idealism is equaled only by their 
nebulosity. 



CHAPTER XII 

RATE-SETTING AND INCENTIVES ABROAD 

Wage Payment in Italy 

In Italy the day-wage system seemed to be the commonest 
method of paying workmen. The piece-rate system is also 
in quite general use, the output per day being determined by 
letting a foreman or an experienced man try out the new job 
and the rate per piece being fixed by bargaining with the work- 
men. In a number of plants there was a day rate of 1.5 lire 
per hour to which the men added from 1.5 to 3 lire per hour 
by piece work. I was unable to secure any evidence of the 
existence of scientific rate-setting. 

In one large plant effort was stimulated- by mottoes — 
"Whoever wastes, damages himself," "The habit makes easy 
the difficult task," and like inspiring sentiments. The same 
plant was equipped with suggestion boxes. One workman had 
dropped in plans for a valuable invention and was rewarded 
with a small royalty and a foremanship. Instinctively I thought 
of Bill Jones on the Sante Fe, who, more than ten years ago, 
after the Emerson engineers had set standards by analytical 
time study, worked out an improvement in his machine by 
means of which he could make $35 a day. Only a year or 
so ago I was told that, as the company had never cut the rate, 
Bill was still getting his $35 a day. 

In an Italian soap factory I found a piece-work committee 
elected by the workers themselves. I was told that this com- 
mittee met the management every month with suggestions and 
complaints and on their own initiative eliminated poor work- 
men. In addition to piece-work earnings, ranging from 10 
to 20 lire a day, a bonus based upon the total production per 

2 93 



294 



AMERICA VS. EUROPE IN INDUSTRY 



day for the plant was paid. The month I visited the plant this 
amounted to 3 lire a day. 

In a large steel plant a bonus for saving oil and similar 
supplies was paid the workmen. A standard was set and the 
value of all savings over and above the standard was shared 
equally by management and men. This system is similar to 
that in effect in a certain progressive Cleveland plant where 
the standard consumption was fixed and both the standard 
and actual consumptions were figured at fixed rates. Stand- 
ard consumption was then divided by actual consumption and 
a bonus was paid in accordance with the percentage of the 
workmen's base rate called for on an Emerson 20 per cent 
bonus chart. 

I found evidences in several plants of special efforts to 
place responsibility for poor work. In one large locomotive 
plant the rivets driven in the boilers were chalked to indicate 
who had done the work. Automatic time-clocks of the most 
improved type are in general use, even in some of the more 
remote plants. 

Rate-Setting in Germany 

In Germany, piece rates in the more progressive plants 
are set by a certain division of the Vorkalkulation Depart- 
ment, which amounts virtually to a rate-setting department. 
This division decides how much time the machining will take 
and adds to this time an allowance for manual work and for 
bad luck. In setting the machine time the usual practice is 
to use "over all" times 1 based upon the timing of similar jobs 



1 Under scientific management the usual practice is to divide the job into its ele- 
ments — some of them requiring only a fraction of a second — and then to record the 
time and method of performing these elementary operations enough so that a standard 
time and method may be prescribed. This standard represents the one best way of 
doing the work under the conditions which exist. It is the basis of the standard 
instruction card, which is furnished the workman for his guidance as to how to per- 
form the work in the standard time in order to secure the standard reward or bonus — 
"the fair fair day's work for the fair day's pay." Those who wish to go into this 
matter fully should consult Mr. Merrick's book, "Time Studies for Rate Setting"; that 
by Mr. Lichtner, "Time Study and Job Analysis"; and the account of the debate before 
the Taylor 'Society published in the Bulletin of the Taylor Society, June, 1921. This 



RATE-SETTING AND INCENTIVES ABROAD 



2 95 



done in the past. If the men encounter too much bad luck 
the blue work ticket previously described is issued to them to 
cover the extra time required to do the work over and above 
the time allowed them by the regular work ticket — made out 
under the direction of the rate-setting division of the Vorkal- 
kulation Department when the work was planned. 

Allowances of this sort are generally a fruitful source of 
discontent unless precisely what constitutes just ground for an 
allowance claim is defined in writing to the last detail. Even 
then there are lawyers on both sides — workmen and foremen 
— who indulge in "interpretations" which cause hard feeling. 
The most horrible example of this sort I ever encountered was 
a bonus for regular attendance, which was paid men who had 
a good excuse for being absent. After some months of trial, 
during which it made liars of every man who wanted a day 
off, and maniacs of the time-clerks who attempted to decide 
as to the validity of the excuses offered and as to the truthful- 
ness of the absentees offering excuses, the system was discon- 
tinued amid general rejoicing. 

Office workers in Germany are paid overtime in addition 
to their weekly pay. This amounts to .7 or .8 per cent per 
hour of their monthly salary. Thus a man who worked one 
hour overtime on a salary of 1,000 marks a month would re- 
ceive 7 marks per hour, or about "time and a half," for each 
hour overtime he put in at his desk. The regular hours for 
office workers are from 8:15 to 5 with half an hour off for 
lunch, except on Saturday, when the working day ends at 1 130 
p. M. 

In one German plant I found in addition to the system 
described above a distinction made between "set-up time" and 
"machine time" on the workman's ticket. This plant figured 



article gives, in the" form of reference notes, what amounts to almost a full bibliography 
of books and articles on time and motion study. In comparing German methods with 
the methods in use elsewhere, the fact that German workmen are trained to their 
jobs from boyhood — both as to technique and as to "will to work" — must never be lost 
sight of. 



296 AMERICA VS. EUROPE IN INDUSTRY 

the time required for each job in minutes and then paid dif- 
ferent rates for different sorts of work — dependent upon the 
skill required for the work. It is the usual custom to pay for 
good work only, payment in each case being OK'd by the in- 
spection department. Extra copies of the workmen's tickets 
showing earnings are furnished workmen, which they retain 
until pay day for use in case of a dispute. This same plant 
was equipped with suggestion boxes and as an additional in- 
centive workman were allowed 50 pfennigs to pay them for 
the time expended in writing each suggestion card. 

View of British Labor 

The situation in England is best understood after reading 
G. D. H. Cole's 2 book, "The Payment of Wages," which sets 
forth the workman's viewpoint in an exceedingly clear and 
logical manner. One or two extracts will make what is to 
follow somewhat clearer : 

Another point which cannot be too strongly stressed is 
that the claims put forward by a few Scientific Management 
experts, and in particular by Mr. Taylor himself, that their 
systems do away with the need for collective bargaining, have 
not the smallest foundation. Mr. Taylor contends that, when 
once Scientific Methods of fixing times and prices have been 
adopted, payment by results is no longer a matter for col- 
lective bargaining, but merely a matter for cold science, and 
that there can be no difference between employer and work- 
man with regard to the proper prices and times for each job. 
At the same time Mr. Taylor assumes without any argument 



2 Mr. Cole, as Honourable Secretary, is in charge of the research work of the 
Labour Research Department, which was formerly a part of the Fabian 'Society. The 
Labour Research Department furnishes the data for and otherwise co-operates with 
the labor, socialist, and co-operative movements. The Labour Party in England is 
led by intellectuals and supported largely by trade unions. It is socialistic and 
frankly antagonistic to .capitalism. The phrases made by the leaders of the Labour 
Party form the language of that section of the trade unions which is vocal, and 
English industry is something over 80 per cent organized. Mr. Cole, while working 
wholeheartedly for the improvemnt of the condition of labor, understands the 
viewpoint of management and capital thoroughly and realizes their part in the 
economic structure, and his books — which are obtainable at the Labour Research 
Department's headquarters at 34 Eccleston Square, Westminster, London, S. W., 
England — should be read by those who wish to understand fully the attitude of the 
British working man toward the various elements cf scientific management. 



RATE-SETTING AND INCENTIVES ABROAD 

that the expert who fixes prices will be the servant of the firm, 
paid by the firm and doing the firm's work. 

All the time-study in the world cannot show how much 
ought to be paid for a job. It can only show at most the 
length of time a job ought to take. 3 That is to say it 
cannot determine what is to be the standard of living or of 
remuneration of the workers. An hourly rate, or at least 
a standard of living must be fixed or assumed before the 
Scientific Manager can set his system of payment to work, 
and, as there can be no Scientific Method employed in fixing 
such a rate, the rate is essentially a matter for bargaining 4 
on a collective basis. This, indeed, is only another way of say- 
ing that Scientific Management has only devised a further 
method of payment under the wage system. Scientific Man- 
agement does nothing to remove the need for collective bar- 
gaining and Trade Union organization. 

That the application of scientific principles to industrial or- 
ganization is a good thing we can all agree in the abstract ; 
and we can at least reach an agreement in practice where 
only inanimate objects are affected. The improvement of 
industrial research, of factory organization, of the estimat- 
ing of costs of production, of the routing of jobs, of the dove- 
tailing of orders, and of the co-ordination between shop and 
shop and between factory and factory undoubtedly call for 
more "science" and there can be no quarrel with any attempt 
to apply science purely in such spheres. There is a real sense 
in which industrial management is a science, just as there is 
a real sense in which political government is a science. 

Time-work on some jobs and piece-work with a guaranteed 
weekly rate on others afford all the inducements to output 
which ought to be afforded; and the decision on any class 
of work as between time-work and piece-work ought to be 
made by negotiation between the employers and the Trade 
Unions on the merits of each case. Where piece-work is 



297 



3 Italics are the author's. 

*Which brings us up against the problem of demand and supply in the labor 
market — or in any other market where bargaining, which is a battle for advantage on 
the part of opponents who each desire to get the most for themselves, match resources 
mental, physical, and moral. This brings us to Napoleon's cynicism, '"Luck favors 
the side with the heaviest artillery," and encourages both sides to concentrate on piling 
up the munitions of industrial warfare rather than upon cheap production, to the end 
that each unit of mankind may possess the largest quantity of things. Disarmament 
doesn't seem consistent with class patriotism — or even with national patriotism — as long 
as classes and nations are organized to protect the interests of the group. 



298 AMERICA VS. EUROPE IN INDUSTRY 

adopted, more scientific systems of determining piece-work 
prices ought to be devised; but the determination ought to be 
made jointly by the two sides, and the science necessary for 
it ought to be in the possession of both. 5 

This brings me to my second point. Time-study, motion 
study and the other expedients of Scientific Management 
may have some beneficent results, especially in such spheres 
as the study of industrial fatigue and the relation of output 
to hours of labour. But here again science must not be the 
monopoly of the management or of the employer. The Trade 
Unions must equip themselves with the knowledge that is 
required and "science" must become the handmaid of col- 
lective bargaining. Just as it is one thing to say that "wel- 
fare" is desirable and quite another to approve of "wel- 
fare work" under the employers' control, so it is one thing 
to desire industry to become more scientific and quite another 
to accept Scientific Management at the hands of the employ- 
ing class. Taylor's contention that under such conditions 
an equal balance will be struck between the management 
and the workers because both will be subject to the "rule of 
law" is unmitigated nonsense. 

Thirdly, Scientific Management presents a number of real 
dangers to industrial democracy. The methods of payment 
which it suggests are for the most part a crude appeal to 
individualism and it is generally agreed among Trade Union- 
ists that where they are adopted the morale and sense of solid- 
arity among the workers are often lowered. They tend to set 
each man's hand against the others and inaugurate a system 
of cut-throat 6 competition between worker and worker even 
in the same grade.. In many of their applications they may 
be fatal to collective bargaining and the standard rate, 7 
though this is not necessarily or universally true of all parts 
or aspects of them. It is most true where Scientific Managers 
adopt the device of a "scientific" grading of labour which sub- 
divides the workers into very small groups or even treats 
each worker individually on his merits. Against such tenden- 
cies Trade Unionism must fight. It must preserve at all costs 



B Italics are the author's. . . ' 

6 The distinction between "cut-throat competition" and the "healthy competition' 
of outdoor sports — football, races, and baseball — needs some defining. 
7 A rate set by bargain. 



RATE-SETTING AND INCENTIVES ABROAD 

its effective right of collective bargaining, the standard rate 
and the solidarity of Labour. 

Fourthly, Scientific Management tends to make more im- 
passable the gulf between Labour and Management. 
For one who believes, like myself, that one of the next steps 
for Trade-Unionism, in its gradual assumption of control over 
industry, will be to take altogether out of the employers' 
hands and vest in the Trade Union the appointment of fore- 
men and the organization of the workshop, 8 this appears as 
a counter-move on the part of Capitalism to remove the 
foremen from the possibility of control by Labour. The way 
for Labour, to my thinking, is the gradual conquest of man- 
agement. For this, Labour must equip itself with scientific 
and industrial knowledge ; and while it is doing so must resist 
any move by the employing class which will make more diffi- 
cult the conquest of industrial control. 

Trade Union rules are resented by the employers as in- 
vasions of capitalistic autocracy and as outrages against 
capitalistic "competence." The employer, on his own show- 
ing knows how to run industry; the workman does not. 

My fifth point follows logically. The employer, I have said, 
on his own showing knows how to run industry. Does he ? 
It would seem that during the war he has been discovering 
very rapidly that he does not, if we can judge from the cry of 
reorganization which has arisen in the employers' own ranks. 
There is a very wide scope indeed for scientific reorganiza- 
tion of industrial methods; and if the employers would de- 
vote to these half the attention which they devote to trying 
to bully, badger, bribe or cajole Labour into the acceptance 
of unscientific systems of payment by results, it would be 
better for all concerned. The biggest and most natural 
field for science in industry is in the management of inani- 
mate objects; and there let it be applied in full. Where it af- 



299 



/ 



8 This is, of course, a regular step in the program of those who would "socialize 
industry," which contemplates the remuneration of actual producers only. Labor 
realizes — especially since the Russian and Italian experiments — that executive and 
technical talent is necessary to the survival of industry when it is grabbed by the 
workers. 

In the final analysis there is a certain parallel between this plan and that of the 
White Motor Car Company which limits the earnings of invested capital and turns 
the balance of the profits over to the working force in the form of salary and wages 
after setting aside various reserves to insure continuous operation. The main differ- 
ence is the retention by capital of the privilege of appointing executives — in order to 
protect itself. 



300 AMERICA VS. EUROPE IN INDUSTRY 

fects men and is applied to men its effects are far more prob- 
lematical. 

We must apply science : but we must not allow science 
to be a class monopoly. The Trade Unions must train them- 
selves for control and in doing so they must resist all changes 
which would have the effect of destroying or weakening their 
economic power. We cannot expect a truly efficient system 
in industry until we have an enlightened democracy capable 
of controlling industry: we cannot abolish the class-struggle 
with a blast from the trumpet of science. But we can make 
up our minds that the end towards which we must strive 
is industrial self-government: and we can test the schemes 
of Scientific Management by means of this principle. If we 
do this we shall not find it wholly bad ; but we shall find in it 
many dangers against which Labour must be on its guard. 

When we consider that this is by far the fairest treatment 
which scientific rate-setting has received from the leaders of 
organized labor in England and that most of British industry 
is organized, it is easy to understand why it has been necessary 
to exercise great caution in introducing scientific management 
into British industries. 

The Taylor system as such is thoroughly unpopular in 
England, principally because of certain statements in Mr. 
Taylor's book, which he himself later admitted were tactless 
and open to misconstruction. After describing the Taylor 
and Gantt systems Mr. Cole continues : 

On the whole, however, British manufacturers have tended 
rather to take the Emerson efficiency task as a basis and to 
base upon it various modified efficiency systems which aim 
at securing similar results. The essence of the Emerson 
system is that the bonus paid for efficiency begins at a 
comparatively low point and the stimulus is thus afforded to 
even the less efficient types of workers. This feature is 
reproduced in many of the British systems, 9 especially in 
those which are designed for repetitive jobs and above all in 
those which are designed for women. 



9 See "A Rational Wages System" by Henry Atkinson (G. Bell and Sons). 



RATE-SETTING AND INCENTIVES ABROAD 301 

British Employers' Opinions 

Employers in England approve of much that Mr. Cole 
says. For instance, in a series of articles ending in January, 
192 1, which appeared in Business Organisation and Manage- 
ment, by two engineers who are on the staff of one of the 
biggest industries in England — A. P. M. Fleming and J. G. 
Pearce — occurs this statement : 

Clearly, under any system of management unaffected by 
collective bargaining, scientific management may be able to 
determine the value of one man relatively to another on a 
basis of output or even of relative skill, but it has no means 
of determining what absolute wages any man should get. 
A claim such as the one that it makes collective bargaining 
and trades unionism unnecessary as a means of protection 
among workers merely irritates organized workers and the 
fact that it is untrue makes it all the more serious as a 
tactical error. It is significant that Harrington Emerson 
and even some men of the Taylor School, notably the late 
Mr. H. L. Gantt, specifically dissociate themselves from the 
views of the extreme school. 

Machinery for Reviewing Rates 

The following is the plan proposed by the managing di- 
rector of the English Electric Company : 10 

Rate-fixing, as it is commonly understood, has in practise 
simply meant this — that the employer fixed rates scientifically 
or unscientifically, but in secret wrote them down on a card, 
and gave them to the workman "to take or to leave." There 
was no pretense of making the operation a bargain between 
the parties, no opportunity for either party in any open, 
straightforward manner to have rates reviewed when once 
fixed. 

This is a system which is fair neither to the employer nor 
to the workmen, and it will have to be abandoned if piece- 
work is to be extended. The first step is to make rate-fixing 
scientific and the next is to provide proper machinery for dis- 



10 Pybus, P. J., C. B. E., M. I. E. E., Factory Magazine, December i, 1920. 



3 o2 AMERICA VS. EUROPE IN INDUSTRY 

cus'sion of, and arbitration on, rates which have been fixed. 11 

Perhaps I may be allowed here to outline the following 
proposals for setting up simple machinery for this purpose 
in a modern factory. 

When a rate is fixed for a new job it is offered to the man 
concerned. If he questions it, he is at liberty to go to the 
time-study office to work through the calculations with the 
official responsible for them, to point out any errors, and to 
have them rectified. If the man remains unconvinced that 
the rate is reasonable, he can then demand a reference to a 
committee which must meet within two days of the complaint. 
Pending the meeting the firm's rate is adopted provisionally. 
The decision of the committee when given is retrospective, 
but no figures as to the time taken on the job between the 
fixing of the rate and the meeting of the committee are 
accepted as evidence by the committee. 

The committee consists of three representatives of the firm 
and three of the men, of whom one is the workman con- 
cerned and the others, selected by him, are two men operating 
the same type of machine or whose work is similar to that 
in dispute. If the committee fails to agree, the firm is called 
on to demonstrate in its own works that the rate offered is 
a fair one. 

It is open for the firm to set in motion the same machinery 
for reviewing a rate which the firm regards as too high, but 
it is understood that any reduction so made on review will 
be compensated for by an equivalent addition to the rate for 
some other job less favorable to the men. 

One great advantage of this scheme is that it brings the 
whole difficult and intricate process of rate-fixing out into 
the light of day and reveals it in its true character as an open 
bargain between the workman and the employer. 

The scheme is capable of development and improvement. 
I see no reason why, in order to meet a difficulty which 
confronts the whole engineering industry, the principle of 
an appeal on piece-work rates should not receive more formal 
sanction. At present, extremists on both sides present a 
formidable obstacle to co-operation between employers and 
labour to the advantage of both. 



"Italics are the author's 



RATE-SETTING AND INCENTIVES ABROAD 303 

Adaptability of the Emerson System 

The Emerson bonus system makes the objections outlined 
by these Englishmen particularly easy to meet. In the first 
place it consists of a base rate, which must be equal to the 
current rate paid for similar kinds of work in the district. 
The current rate is fixed by the condition of the labor market, 
collective bargaining, the cost of living, and all those things 
which fix ordinary wages. In the second place a bonus, which 
is a percentage of the base rate, is paid as a reward for the 
attainment of certain scientifically determined quality and 
quantity standards. The base rate fluctuates with the current 
wage rate in the district — is "set by collective bargaining," 
if you like — but the standards of quality and quantity and 
the percentage of bonus for attainment of these standards 
are never altered unless the conditions which govern are ma- 
terially altered. 

This method avoids the suspicion of "cutting piece 
rates," which is always present whenever men understand 
remuneration in terms of the "price per piece" and funda- 
mental conditions necessitate lowering wages. The most pro- 
gressive American companies now change the base rate only 
when there is statistical proof of a change in living costs. 
The United States Department of Labor now gets out a 
bulletin which gives commodity prices by districts each month. 
From this a weighted average, representing the usual family's 
expenditure, is worked out and alterations in base rates are 
made only after discussion of these statistics with the working 
force. This plan is much fairer than the old arbitrary cut. 
The casuist, of course, inquires what evidence there is that 
the cost of living and wage — say, in 19 14, before the war — 
which is adopted as a basis for figuring these fluctuations — 
was fair. Again we are bang up against "collective bargain- 
ing" and Napoleon's assertion as to the resting place of 
luck. 



304 AMERICA VS. EUROPE IN INDUSTRY 

The Priestman System 

The British Higher Productive Council favors the Priest- 
man Brothers' plan of reward for production as less dehuman- 
izing than "Taylorism, which appears to be based on a kind 
of German regimentation to which we are all instinctively 
opposed," 12 as "more in keeping with the British temperament 
because, in appealing to the team spirit they are appealing to 
that which is already so highly developed in British sports." 
Under the Priestman system the managers, in agreement with 
the workers, assess what they call the "standard output per 
month." The bonus is based upon this standard and varies 
directly with the percentage by which the actual output exceeds 
it. (Standard ioo tons, actual 120 tons, wage of everyone 
increased 20 per cent.) This is considered one of the most 
successful "payment by result" systems in England and is 
widely discussed. If applied by means of collective bargain- 
ing to two shoe factories in the same town, one of which was 
50 per cent efficient and the other 80 per cent efficient, the 
final earnings of the men in each case would present some 
interesting economic and ethical problems. 

Where the unions in England allow or connive at piece 
work, 13 the earnings of all workers under it must amount to 
at least 25 per cent more than the fixed union scale. In one 
very large plant I found a day rate of 62.5 shillings a week 
for the day shift with piece workers earning 25 per cent extra. 
Those on night shift received 12.5 shillings additional. In 
some cases the group bonus based on standard output set for 
the department was in effect. There seemed to be compara- 
tively little systematic soldiering and the shop spirit was 
exceedingly good. 

12 Mr. Taylor's pig iron handler, as described in his own book and the Hoxie 
report, represents the evidence whenever anyone abroad — from a labor agitator or an 
uplifter to a defender of "things as they are," or a patriotic reactionary — wishes to 
smash scientific management. 

13 In one case a union which was offered a bonus appealed to an expert to decide 
whether the bonus was "payment by results," which the union rules forbade. Their 
leader said, "We'd like to have the extra brass if it don't violate the union rule and 
if we don't have to understand how the bloody thing is figured." 



RATE-SETTING AND INCENTIVES ABROAD 305 

An Application of the Group Bonus System 

In another plant the efficiency of each operator in each 
department was figured each week, a bonus curve similar to 
the Emerson being used, and the individual efficiencies being 
shown on a wall chart in each department. These efficiency 
percentages, which indicated how nearly each operator per- 
formed his part of the department's quota or standard output, 
were combined and charted as a department efficiency. De- 
partment efficiencies were combined into division efficiencies, 
and division efficiencies into a total output efficiency for the 
plant. Each division is paid bonus in proportion to its attain- 
ment of the division standard. If a division falls down, the 
system makes it possible for all to see just who was responsible. 
Some divisions were no per cent efficient at the time of my 
visit, which had been only 20 per cent efficient a couple of 
years before when the plan was put into effect. Wherever 
possible workers are also on piece work in addition to this 
group bonus. Just how scientifically standards were set it 
was impossible to judge, although my judgment was that the 
work was extremely efficient. The shop spirit was certainly 
excellent. 

The superintendent of this plant was on bonus also. The 
standard was the cost per unit at pre-war prices of labor and 
material. Against this was set the actual cost, the superin- 
tendent being credited with the rise in labor, material, savings 
made by improvements for which he was responsible, and 
salvage, and being debited with waste and savings made by 
improvements for which he was not responsible. When his 
account was substracted from the cost per unit the balance 
was subtracted from the standard and the difference, multi- 
plied by the number of units produced, represented the net 
saving (or loss) his acts had resulted in. He was paid 10 
per cent of this saving. His bonus was running about £500 
a year at the time of my visit. 



306 AMERICA VS. EUROPE IN INDUSTRY 

Other Methods in Use 

In one department of a very large plant I found a foreman 
who had worked out a sort of group bonus for his department 
which was unique. The department contained about a hun- 
dred men working on automatics. He said he paid the men 
on piece work and further demanded the departmental quota 
daily regardless of how many machines were broken down or 
how many men were absent ! I fear he was striving to please ! 

In one of the best operated plants I have ever visited 
standards were very carefully set over a period of something 
like four years. Four classes of pay were then established 
based upon the actual attainment as compared with these 
standards, the lowest being above the union scale. 14 In this 
plant individual record cards are kept showing each man's 
percentage of attainment of standard each week in the form 
of a graph. Each man's attainment of standard cycle time 
is also shown. Cycle time represents the theoretical time 
each machine could have run had there been no delays of any 
sort. Men are paid according to the class to which their 
efficiency percentage entitles them. 

Some Failures of Group Bonus 

In another plant, to some extent under American influence, 
I was told that the gang bonus had been discarded because 
the fast workers refused to speed up the slow workers, who 
adopted the attitude of "Why should we work, we get our 
share just the same?" A guaranteed day rate was substituted, 
with a sliding bonus scale in proportion to output (Emerson 
principle). According to the new plan rates are set, though 
rather roughly, with a stop-watch, a 25 per cent fatigue allow- 
ance being added. Individual record cards are used and fore- 
men are paid in accordance with the efficiency of their depart- 



l4 This is exactly the same plan of payment devised by certain industrial engineers 
during the war to meet organized labor's objections to piece work and bonus. 



RATE-SETTING AND INCENTIVES ABROAD 307 

ments as shown by these cards. Very careful tabulations of 
the number of workers on standard — those 90, 80, 70 
per cent efficient — are compiled each month. The individual 
workers are also marked on conduct and quality of work 
and paid bonus in accordance with their attainment of 
standard. When I saw this plant the shop spirit was 
exceedingly good, the girls from time to time breaking spon- 
taneously into song as they do in the chocolate factories. 
This plant was one of the few "open shop" establishments I 
encountered in England. 

Group bonus is very much under discussion at present. 
Theoretically its success rests upon the drones being driven 
out by the workers. The truth seems to be that where the 
standard for the group is set by "experience" instead of by 
means of a careful analytical time study, there is nothing 
to prevent the workers from limiting their output to half what 
could easily be turned out without injury to anyone. There 
are all the reasons why they should do so that exist in the 
case of piece rates set in the usual way. We have just cited 
one case of failure. The Santa Fe Railway tried and dis- 
carded the group bonus. Industrial engineers who have 
worked in automobile plants where the chain assembly is used 
know that even when the pace is regulated by machinery the 
gang along the conveyer very often is not doing within 20 or 25 
per cent of what it could do. Where progress is not mechan- 
ically regulated the efficiency is even lower. There have been 
some very successful installations where progressive machining 
makes it possible to set standards for comparatively small 
groups of machines, whose operators are paid on a basis of 
the work they turn out as compared with a standard set by 
means of the analytical time study. Under such circumstances 
"hard luck" is pooled and time-keeping is simplified. But 
anyone who thinks he will be foxy and induce the average 
crew to chase each other into maximum output for his benefit 



3 o8 AMERICA VS. EUROPE IN INDUSTRY 

— all unsuspected by the workmen — is sadly lacking in knowl- 
edge of labor psychology. 

Rate-Setting in France 

Scientific rate-setting has gone further in France than in 
any other European country. We have already referred to 
the work of Coulomb and Vaubon who attempted to establish 
unit times on various sorts of work several centuries ago. 
At one plant I found that scientifically established piece rates 
had been in effect over twenty-six years. Such operations 
as replacing the linings in steel furnaces had been standardized 
to the point where the time allowed varied with the tempera- 
ture of the furnace at the time the work was done. In one 
plant payment was made on a basis of actual metal chipped. 
After the work was completed the channels were filled with 
mastic which, after it had been struck flush with the top of 
the aperture, was removed and weighed and the payment based 
upon this weight. 

French labor unions are asking for time study as a basis 
of determining the fair day's work. In one case where rates 
were being readjusted after the war the men in a very large 
establishment demanded that the company's industrial engineer 
do the work on a basis of standard operation times. A large 
shipbuilding plant has had standard times in effect for over 
five years. At another enormous establishment over 100,000 
standard instruction cards are in use. Time study is in use 
at the plants manufacturing electrical goods. Standard times 
have been established in the plant which manufactures the 
municipal omnibuses in Paris. 

The establishment of standard times in France has brought 
to light exactly the same sorts of inefficiencies and injustices 
that the same work always uncovers in America — material 
and tools which cannot be depended upon and all sorts of 
delays chargeable to ineffective management. 



RATE-SETTING AND INCENTIVES ABROAD 



309 



Method of Setting Standard Time 

The method of setting the standard time is similar to that 
in use in America. An analytical time study is made of the 
job until unit times can be established for each element of the 
work, which when combined represent the time each operation 
should require under conditions which are normally attainable 
by a good workman. These operation times are classified 
into "preparation time," "handling time," and "machine time," 
and a different fatigue allowance is made for each, depending 
upon the sort of work. In the case of a certain type of work 
in a shipbuilding plant, 40 per cent fatigue allowance was 
made on manual work (handling time) and 10 per cent on 
machine time. 

To the standard time for the job so established — which 
would represent the 100 per cent efficiency for the job under 
the Emerson system and the standard of performance or task 
at which the higher piece rate goes into effect under the Taylor 
and Gantt methods of payment — what is called a "bonifica- 
tion" is added. The standard time and the bonification, which 
is usually 20 per cent, together form the "time allowed" for 
the job. 

Whenever the workman completes a job he is paid the 
"time allowed" for it. It is expected that a normal workman 
working under standard conditions will — with a 30 per cent 
bonification — make 30 per cent overtime, which is really his 
bonus for doing the work in standard time. Each instruction 
card gives the detail of just how the "time allowed" is arrived 
at, as shown in Figure 52. 

The workman — if he does the job in standard time — in 
the case illustrated in Figure 52, 149 hours — makes 30 per 
cent bonus, if he does it in "time allowed," or if the job takes 
longer, his regular hourly rate prevails. If he does it in less 
than standard time he makes more than 30 per cent bonus. 
It is in effect an example of "day rate guaranteed, and bonus 



3 J o 



AMERICA VS. EUROPE IN INDUSTRY 



exactly in proportion to accomplishment," which is the prin- 
ciple of the Emerson system of reward. 



Operation 


Time 


Speed. Feed, etc. 


No. Description 


Preparat'n . 


Hand 


Mach. 


Sketch of Piece 


i 

2 

3 
4 

5 
6 

7 
8 

9 

10 

ii 

12 

13 
14 
15 
16 

17 




15' 

55' 

60' 

12' 

I5 r 
20' 

20 r 


25' 
20' 

17' 
27' 


348' 

65' 

98' 

II2 r 
158' 
166' 

277' 






197' 




1224/ 




Maj oration de 40% 

" 10% .... 


79/ 




122' 




Total 


276' 


89/ 1346' 




Total 

Bonification de 30% .... 






I7II' 

515' 








2226 / 


146 hours 



Figure 52. Instruction Card Showing How Time Allowed Is Computed 



Record of Bonuses Earned 

Very careful records are kept of the percentage of bonus 
earned by the men in each department. (See Figure 53.) 

The simplicity of the thing is beautiful — a graphic state- 
ment of just how many jobs in the department during the 



RATE-SETTING AND INCENTIVES ABROAD 



311 



two weeks fall within each class. The manager knows how 
much bonus is being earned and whether the standard times 
were set with sufficient care to enable the majority of the men 
to earn 30 per cent standard bonus. It also emphasizes suffi- 
ciently the non-bonus jobs and those upon which extraordi- 
nary earnings were made so that investigation will follow. 



Bureau des Temps 
M.G.T. Turbines 



Etat des Benefices 
faits par les Ouvriers 



Perte 
De a 100 

•• 10.151 a 20^ 
» 20.10 a 300 
•« 30.1/o a 400 
«' 40.10 a 500 
«« 50. H a 600 
.« 60.10 a 700 
" 70.10 a 800 
•• 80.10 a 900 
•« 90.10 a 1000 
» 100.10 a 1200 
Au dessus de 1200 



33 du— au— Juin 19 

7777777 




Figure 53. Record of Percentages of Bonus Earned 

To this record are attached several analysis sheets showing 
the number of jobs done, the number for which instruction 
cards were available, and the number of new studies made 
on each class of machine work. The individual jobs classified 
according to machine types are then analyzed by order number 
and instruction card number and the percentage of planned 
time vs. actual time is given. The particular analysis sheets 
I have before me show that the planned time was i.ii per 
cent of the actual time in the case of the Tours, i.ii per cent 
in the case of the Outils, 1.09 per cent in the case of the Main, 
etc., for the whole month of June. 



312 



AMERICA VS. EUROPE IN INDUSTRY 




Figure 54. Analysis Sheet Showing Planned Time as 
Against Actual Time 

Top section of top chart shows "planned" vs. "attained." The sec- 
ond section shows the unfilled orders in tons, as do the two sections 
of the lower chart. 



RATE-SETTING AND INCENTIVES ABROAD 



313 



This latter is a record which I have personally found ex- 
ceedingly valuable as it shows not only the efficiency of plan- 
ning but the efficiency of shop co-operation. The actual out- 
put each day is platted in black against the output planned, 
(see Figure 54), which is platted in red and entered upon 
the chart directly after the planning meeting held on the after- 
noon previous. The discrepancy then between the red and the 
black lines represents either poor planning, i. e., failure to attain 
the standard output to which the departmental foremen have 
agreed, or poor co-operation between planning and executive 
departments in carrying out the plan in the shop. The dis- 
cussion which ensues at the meeting the following day places 
the responsibility and tends to discourage either the planning 
department or the shop making the same mistake again. 

Other Systems in France 

At one French plant which I visited there was a group 
bonus based on the degree of attainment of a standard output 
set for the department. Thus, if 40 tons a day was the 
standard for a rolling-mill or a forgeshop employing 40 men 
and the average for the month was 30 tons, every man in the 
crew would get J4 of the sum set up as bonus. Various 
other sorts of bonus have been in use for a very long time 
in France. In one plant they pay the man who makes the 
record for the month on certain sorts of work a bonus of 50 
centimes a day all the next month. Sometimes a bonus is 
paid to the workman who wears out the least number of tools 
— as compared with a standard — during the month. The 
"war bonus" is really not a bonus at all — in the sense that 
the term has been used in these chapters — being simply a raise 
in wages to take care of the rise in the cost of living during 
the war, disguised as a bonus in the hope that the workers 
could be separated from it more easily after the war when 
values returned to normal. 



3H 



AMERICA VS. EUROPE IN INDUSTRY 



At another plant I found a well-organized time-study- 
department which determined the standard times required for 
each operation. The instruction cards carried separate col- 
umns for machine time, hand time, etc., and the total repre- 
sented the standard time — or the time the job would take a 
good workman. This standard time was then reduced to a 
price per piece expressed in francs. The workman receives 
his day rate under any circumstances. To this is added his 
piece-work price. This is figured as follows : 

Standard price per piece n francs 

Pieces man makes per hour . 12 

Piece rate earning per hour (.11 x 12) 1.32 

Piece rate earning for 8 hours (1.32 x 8) . . . . 10.56 
Day rate , 1 1.20 

Total wages per day 21.76 

If the workman makes more pieces per hour than the 
standard he gets only half-price for them. 

National Characteristics 

There is no question but that the French industrial engi- 
neer gets down to fundamentals in determining the factors 
that regulate the time required for a given piece of work. 
His principal handicap has been lack of the most modern 
machine tools. Nevertheless he realizes thoroughly the 
necessity for carefully set standard times, the importance of 
instruction cards and the necessity for rewarding the workman 
exactly in proportion to what he accomplishes if plans are 
to be carried out successfully, and if efficient production is to 
be maintained continuously. The French workman, in spite 
of his respect for paternal methods, has been unusually quick 
to grasp the many and logical reasons for standardization. 
As a result, France, in her most progressive plants, has devel- 



RATE-SETTING AND INCENTIVES ABROAD 



315 



oped much that is worthy of careful and prolonged observa- 
tion and study. 

In studying the system in use in each country due allow- 
ance must be made for the inherited characteristics of each 
people. What appeals to workmen as an incentive in one 
climate and environment does not interest, them at all else- 
where. Furthermore, a phrase which sounds perfectly harm- 
less in one country is a perfect detonator in another. All this 
must be taken into consideration when the reaction to various 
systems of rate-setting and of incentives are studied in each 
country. 



CHAPTER XIII 

PERSONNEL DIRECTION 

Materials, Processes, and Gain 

Personnel direction is simply another phase of industrial 
specialization which has arisen as industry has grown. We 
have seen how standardization, planning, dispatching, and 
rate-setting have developed to cover the material, mechanical, 
and production speed elements, as the industrial unit has grown 
from Benjamin Franklin's shop, in which the owner worked 
with his four or five assistants to the plant employing 1,000 
or even 50,000 men. As the units increased in size attention 
was first centered upon the material and the methods of proc- 
essing it in order that it should emerge from the plant as a 
product whose total cost should be such as to permit its sale 
at a profit in competition with articles designed to fulfil a 
similar want on the part of mankind. 

From the days when commerce was born — from the dawn 
of history, before even the Semites got into Babylonia, down 
through the history of Carthage, of Venice, of Spain, and of 
Drake's England, down even until today — business has been 
called a "venture." A business venture has been an adven- 
ture in which some risked their lives and some their fortunes. 
The poor man has risked what he had — his life and his health, 
partly through love of action and partly for hope of gain — 
and the rich man has risked his gold and his ships for the 
sake of profit. As the world has become more law-abiding 
the risk both of loss of capital and of loss of life has become 
less until capital is ordinarily satisfied with 8 or 10 per cent 
and labor works for a livelihood. But the venture has always 
been undertaken — the s:oods, the ship, or the factory has 

316 



PERSONNEL DIRECTION 



317 



always been contributed through hope of gain — for the sake 
of the return on invested capital. This is as true of the widow 
who buys a share of Steel Preferred as it is of the man who 
sells his New England home in order to join the gold rush 
to Alaska. 

Under the circumstances it is not strange that gain has been 
considered first. Wealth is scarce — because only a few have 
the energy, the wisdom, the power of self-denial, the desire, 
the ruthlessness, and the luck to acquire it. There are more 
poor people than rich people. The law of supply and demand 
forces those who have not to seek necessities from those who 
have. Therefore the poor have always worked for the rich 
and — in spite of the Russian experiment, which was more 
successful as a method for making the rich poor than the 
poor rich — will quite probably continue to take their orders 
from those who have the qualities necessary to the acquisition 
of capital. At any rate it is quite natural that the stability 
of capital and the return on capital received the first considera- 
tion as the world became industrial. 

Awakening to Human Needs 

As a result things were done, while mankind was learning 
the new game of production in large steam-driven units, which 
produced human derelicts who were a menace to society. The 
result was factory acts, labor legislation, and the awakening 
of a social conscience capable of protecting the poor. For- 
merly in the villages and in the small water-power shops the 
poor had been protected by personal contact with the wealthy. 
A cook in your own kitchen with diphtheria spurs the family 
to action. A workman a mile away in a slum, sick with the 
same disease, is not particularly alarming — until an epidemic 
comes. Then the health officer is called in, and public opinion 
demands the proper expenditure for isolation, sanitation, and 
education. 



3 i8 AMERICA VS. EUROPE IN INDUSTRY 

As a result of the awakening of the public, and particu- 
larly of the manufacturer and of the capitalist, to the effect 
of the large industrial unit upon the worker — as a citizen, 
as a factor in production, and as an industrial asset — attention 
was directed to the necessity of discovering some means of 
reproducing, under irrevocably altered conditions, the close 
contact between owner and employee which had existed in 
the days of the small shop in the small town where all worked 
and lived in close contact with each other. 

Employment Management 

The war — which forced labor into the strategic position 
which, under the law of demand and supply, capital had held 
before — emphasized every injustice and every inefficiency 
which had resulted from loss of contact between employer 
and employee. Labor turnovers of 500 and even 1,000 per 
cent — which meant that each worker in the factory was replaced 
and a successor was "broken in" and trained to the work at 
great expense due to loss of production and spoiled material, 
from five to ten times a year — were common. America, there- 
fore, devised what was for this country an entirely new thing 
— "employment management." 

Employers, at their wit's end because labor was spending 
its time in joy-riding from one plant to another instead of in 
working, welcomed every sort of impractical uplifter who 
called himself an "employment manager." The government 
gave six weeks' courses in employment management. All 
sorts applied, from draft-dodging ball-players and social up- 
lifters who could lay claim to industrial experience, to ancient 
and mildewed foremen. Fortunately very few such were 
stamped with the government seal, but nevertheless enough 
of them became sufficiently familiar with the jargon of the 
profession to give voice to a lot of nonsense which the capable 
men are still trying to live down. Callow youths were en- 



PERSONNEL DIRECTION 



319 



trusted with duties which would have taxed the powers of a 
diplomat and there were naturally failures. 

Elements of Scientific Personnel Management 

When the smoke and turmoil had cleared away there 
emerged a clean-cut and necessary professional man — the di- 
rector of personnel — a man of the caliber of corporation vice- 
presidents — tactful, experienced, a psychologist, and a diplo- 
mat of wide technical knowledge. His duties, as they have 
developed, are shown in the tabulation which follows : 

1. Employment direction — maintenance at the minimum 

of labor turnover and expense 1 of breaking in new 
employees. 

2. Safety — prevention of loss by accident. 

3. Sanitation and health — prevention of loss by sickness. 

4. Education — improvement of employees' quality. 

5. General service — extension of section 1. 

1. Employment Direction: 

(a) Maintaining sources of labor supply from without the 

factory. 

(b) Analyzing demand, within the factory — maintenance 

of job specifications and list of immediate and future 
departmental requirements. 

(c) Interviewing the applicant — mental and physical anal- 

ysis — looking up previous record, selling prospective 
employee the job he is fitted for. 

(d) Fitting the new employee to his environment — intro- 

duction to foreman, fellow-workers, physical sur- 
roundings, conditions, securing lodgings, etc. 

(e) Following the employee's progress — maintenance of 

individual records. 

(f) Insuring just treatment of employees — investigation 

of grievances, assistance in securing deserved pro- 
motions and raises, insistence upon penalties in pro- 
portion to misdemeanors. 

^he cost of breaking in a new man varies from perhaps $10 on the lowest sort of 
labor to $50 and more on skilled men. 



320 AMERICA VS. EUROPE IN INDUSTRY 

(g) Investigating and reducing absenteeism — investigation 
of home environment, attendance bonus. 

(h) Transferring employees from one department to 
another. 

(i) Discharging and laying off employees — investigation 
of causes. In co-operation with foremen — see later 
paragraphs. 

(j) Investigating cases of employees who leave — persua- 
sion of individuals not to leave. 

(k) Maintaining a continuous statistical analysis of em- 
ployment conditions within and without the plant — 
preparation of government reports, representing 
the company in labor matters and at conventions, 
etc. 

(1) Advising the management as to changes necessary in 
the company's labor policy to keep the labor turn- 
over at a minimum. 

2. Safety: 

(a) Analyzing possible and probable hazards. 

(b) Providing. guards and safety devices wherever prac- 

ticable. 

(c) Insisting upon the use of guards and upon reason- 

able carefulness — frequent inspection of all work 
and recreation places. 

(d) Promotion of safety-first spirit — organization of 

safety committees, first-aid teams, competition be- 
tween departments and plants, bulletins, lectures, etc. 

(e) Analysis and report of all accidents — devising further 

preventatives. 

(f) Following up accidents — to insure proper care and 

shortest possible period of disability, to assist in 
securing compensation, to secure suitable work at 
end of convalescence. 

(g) Maintaining a continuous statistical analysis of acci- 

dents and their causes — acting as a clearing house 
for the best and latest safety practice, 
(h) Advising the management in regard to safety matters 
so that the economic loss due to accidents will at all 
times be kept down to the minimum. 



PERSONNEL DIRECTION 

3. Sanitation and Health: 

(a) Physical examination of applicants and workers. 

(b) Re-examination of defectives and of employees ex- 

posed to industrial hazards — insistence upon transfer 
when necessary, follow-up of all cases. 

(c) Supervision of treatment of accident, surgical, med- 

ical, occular, and dental cases — first aid. 

(d) Preventive work — isolation of contagious diseases, in- 

spection of water, sewers, ventilation, lighting, 
heating in plant and in homes, elimination of indus- 
trial disease hazards. 

(e) Investigation of absences. 

(f) Maintenance of a continuous statistical analysis of all 

cases of sickness and the probable cause, the treat- 
ment, and the result — serving as a clearing house for 
all medical data. 

(g) Advising the management in regard to health and 

sanitation matters in order to maintain economic loss 
at the minimum. 

4. Education : 

(a) Keeping before the workmen the aims, ideals, and 

policy of the company — house organs, clubs, lec- 
tures, bulletins. 

(b) Keeping before the management and the plant execu- 

tives the aims, ideals, and actuating motives of the 
workmen — foremen's meetings, committees. 

(c) General education of employees and their families in 

American ideals (naturalization, etc.) — libraries, 
bulletins, clubs, lectures on health, sanitation, safety 
first aid, etc. 

(d) Thrift education — mutual benefit and building loan 

associations, plant savings banks, thrift gardens 
(prizes). 

(e) Co-operation with industrial engineering department 

in educating new types of labor, women, etc., and in 
instructing employees by new methods — vestibule 
schools, etc. 

(f) Serving as clearing house for information required 

by management, executives, workmen, community, 
and government. 



321 



322 AMERICA VS. EUROPE IN INDUSTRY 

(g) Maintaining continuous statistical analysis of educa- 
tional work and results, 
(h) Advising the management as to policy. 

5. General Service: 

(a) Lockers and showers. 

(b) Company restaurant. 

(c) Commissary or company store — goods at cost, saloons. 

(d) Boarding houses and hotels. 

(e) Company houses. 

(f) Company farm — vegetables at cost. 

(g) Athletic teams — baseball suits, etc., furnished by 

company. 
(h) Amusements — movies, theatricals, picnics, drum corps, 

play grounds, and camps. 
(i) Insurance — life, health, burial, group insurance, 
(j) Pensions, 
(k) Profit-sharing. 

(1) "Welfare" — all the way to aesthetics. 2 
(m) Statistics of a general nature, 
(n) Advice to management, general. 

Shop Politics 

At first the troubles of the director of personnel were 
multitudinous. The propaganda "listens well" to the usual 
line executive until some misguided employment manager 
starts to insert an altruistic paw into that vital section of the 
plant mechanism known as "shop politics." The time-worn 
executive then emits a loud howl, arises on his hind legs, and 
damns all personnel workers and uplifters unto the third and 
fourth generation. The common attitude of the line — whether 
workman, foreman, or superintendent — toward ill-defined 
staffs was once clearly expressed to me by an exceeding wroth 
Hibernian who explosively poured forth certain convictions, 
the mildest and most printable of which was to the effect that : 
"He never worked in such a creator-condemned hole, where 



2 One iron foundry arranged for their moulders to eat their lunches in a specially 
constructed rose garden equipped with canards in cages. 



PERSONNEL DIRECTION 



323 



an honest son of Ireland couldn't tell which boss to be good 
to." 

Moriarty's language may have been crude, but his con- 
clusion did not lack finish. Furthermore, it represented a law 
of human action which antedates the pyramids — the law of 
reciprocity — under which the weaker propitiates the stronger 
in time of peace in return for protection in time of war. This 
is one of the fundamentals of organization as well as of sur- 
vival. Rome existed under it, feudalism improved upon it, 
and it has reached its full flower in municipal and industrial 
politics in America. 

When, therefore, the foreman or the superintendent is 
told that the employment manager has been introduced into 
the organization to assist him, by relieving him of the trouble 
of hiring and firing and of rate-raising, he is nearly as pleased 
as the man who is relieved of the burden of his wealth by a 
nocturnal visitor with a bull's-eye and a gat. Up to that time 
about the only things that had made his life in the factory 
worth living was his power to cast into utter darkness the 
impudent, the lazy, and the "snitch." The prestige so acquired 
was one of the things that repaid him for various unpleasant 
features of existence — such as the fact that piece workers 
under him made more money than he did. There was solid 
personal satisfaction in having unanswerable repartee in his 
possession when dealing with the "fresh" and the sullen. The 
lazy were, of course, virtuously fired in the interest of effi- 
ciency — of which he was sole judge. The snitch — a creature 
beyond the pale, as any workman or any non-paying state 
guest will tell you — must be exterminated for the good of 
society. In supplement to these very human pleasures the 
exercise of altruism furnished a pleasant thrill. The satis- 
faction of increasing the weekly income of a faithful hench- 
man could be equaled only by the glow of well-being which 
permeated his entire physique when Tony bowed his "Tank 



3 2 4 



AMERICA VS. EUROPE IN INDUSTRY 



you, boss," or Mike grinned his "An shure, ye are a dom fine 
man to wurk fur." 

"Pull" and "Czarism" 

Even the most conscientious have their human weaknesses. 
We all like to help humanity — that is why the uplift market 
is so glutted that the man who would save souls comfortably 
must marry a rich wife — and the loss of these rights, to earn 
which he worked hard and faithfully many long years, is a 
serious blow to the foreman who has forced his way to a 
position of standing in the community, in spite of lack of 
education. In addition, the man who has fought his way to 
a foremanship has had ingrained in his nature this law of 
reciprocity. He perhaps gained his own first step by doing 
a favor for some person who had the ear of someone in 
authority. If Lord Chesterfield could write a book which 
has served as a handbook to practical social success since 
before the Revolution, the burden of whose message has been 
"neglect to please no one," and if every old-school pillar of 
society can continue to enthrall ambitious youth with speeches 
whose slogan is "politeness, industry, and economy," we must 
not blame the workman who would rise for building up, with 
meticulous care, what he calls a "pull" with his superiors. 

In consequence, when he becomes a boss he feels that his 
prestige rests upon what he is able to do for his inferiors. 
As William Travers Jerome once said, "It is all very well 
to try to reform the city government by writing high-brow 
articles and delivering high-brow speeches, but how many 
people in Hamilton Street read the Atlantic Monthly ? The 
fellow who gets the votes lives over Mulligan's saloon and 
gets Willie out of jail and finds Rosie a job. Favors received 
cut more ice than fine sentiments." In consequence the pro- 
posal to cut away the roots of the foreman's plum tree — 
removing the right to hire and fire and raise rates — and to 



PERSONNEL DIRECTION 325 

graft upon them the structure of the employment manager, 
is viewed with scant favor by the industrial boss who has 
been accustomed to have his department touch its forelock 
and with one voice chorus, "Good morning, King," in reply 
to his daily "Good morning, men." 

The inexperienced employment manager is prone to at- 
tribute this feeling on the part of the foreman to something 
vicious and to label it "czarism." I have actually heard 
half-baked "employment managers" tell the foremen that they 
expected to stamp out czarism and injustice to the workmen, 
and I have heard men who should have known better tell a 
convention that it was the mission of the employment manager 
to put a heart into the general manager. Neither foremen 
nor general managers like to be told that they are tyrants 
and to have it hinted that they are equipped with a gizzard 
instead of the usual cardiac structure. Consequently such 
an attitude on the part of a man who enters an industrial 
organization can result in only one thing — organized oppo- 
sition. 

Inefficiency and Wilful Misinterpretation 

Aside from all personal feeling in the matter, lack of 
knowledge of "who to be good to" on the part of the workman 
leads to very real plant inefficiency. The average workman 
requires much education before he understands any sort of 
functional foremanship. Where authority is divided he plays 
safe for a long time by consulting "both bosses" before he 
acts, since past experience has taught him that the first result 
of taking orders from the wrong boss results in personal 
chastisement from the foreman who feels affronted that his 
authority should be doubted. This is pure feudalism, of 
course, but it has its roots deep in human nature and the result 
of a henchman changing overlords has more than once rocked 
entire kingdoms before the barons in question ceased their 



326 AMERICA VS. EUROPE IN INDUSTRY 

avenging forays. The result then of the workman or the 
subforeman misunderstanding functionalized control — and 
provision for every eventuality often requires standard prac- 
tice instructions as voluminous as the common law of England 
— certainly leads to loss of time in getting into action when 
two or more bosses must be consulted, and may mean a local 
industrial revolution. 

In addition, lack of discipline in a foreman's department 
leads to the wilful misinterpretation of orders, to certain sorts 
of loafing — since it is not always possible to make even piece 
rates or bonus all-embracing — to industrial accidents, and to 
various other things which decrease quality and increase the 
cost of production. Where such things occur the greatest 
inefficiency of all lies in the fact that the whole thing is 
preventable. 

Standard Practice Instructions 

The first step is a complete written definition of the duties 
and powers of the employment department wherever there is 
contact with the line organization. These will necessarily vary 
with the size and sort of industry. Perhaps a typical instance, 
however, would be represented by a plant employing less than 
a thousand men, whose employment department consisted of 
a director of personnel and two or three clerks. Under such 
circumstances the following standard practice instructions, 
signed by the general manager, have been found to relieve 
much of the tension occasioned by the delegation to a new* 
comer of long-cherished privileges : 

i. The Employment Department is hereby authorized to 
"hire and fire" all employees up to the grade of assistant 
department foreman. 

2. Hiring shall be interpreted to mean securing employees, 
suitable in ability, in sufficient quantity, to perform effectively 
the work scheduled to the operating departments. It further 
implies the assumption of the responsibility of accepting or 



PERSONNEL DIRECTION 

rejecting every prospective employee, by the Employment De- 
partment, which has time and is equipped to do this work 
carefully. 

3. Although the final decision as to whether a man or 
woman is to be hired or not must rest with the Employment 
Department unless appeal is made to the management — it is 
desired and expected that the various department heads 
render every assistance at all times both in securing the work 
people required and in advising as to the suitability of such 
men for the work for which they are required. 

4. Since such executives are responsible for the efficiency 
with which their departments are conducted, and since they 
are on bonus as well as the men, no foreman is required to 
keep a man in his department who is doing unsatisfactory 
work or who destroys the effectiveness of any crew. Such 
an undesirable should be returned to the Employment De- 
partment and detailed explanation of his shortcomings made, 
preferably in writing. 

5. In the case of skilled or semiskilled men, foremen should 
fill out the Leaving Notice Blank and hand it in at the Em- 
ployment Office before the man is asked to leave the depart- 
ment. In case of insubordination, drunkenness, or other 
flagrant offense, the offender's foreman should take him to 
the Employment Office immediately and if necessary arrange 
for his removal from the premises at once. 

6. It is, of course, assumed that every foreman will give 
each man sent him a fair trial, which implies : 

(a) Adequate instruction in the work the new employee 
is expected to perform (assuming there is no vestibule 
training school). 

(b) Allowance for mistakes due to unfamiliarity with the 
work and with his new environment. 

(c) Opportunity in case of preliminary failure to try other 
work for which the novice may be fitted mentally and physi- 
cally, whenever circumstances permit. 

(d) Absence of prejudice on the part of both foremen and 
co-workers on account of race, sex, or previous record. 

7. It is further assumed that all executives will make full 
allowance for existing labor conditions when they are such 
as to require the exercise of unusual patience with the 



327 



328 AMERICA VS. EUROPE IN INDUSTRY 

quality or quantity of labor delivered — and also with delays 
which such conditions render necessary. Attempts to blame 
the Employment Department for conditions due to the general 
labor situation will not be tolerated. 

8. Full co-operation with the Employment Department in 
locating sources of labor supply through present employees, 
together with suggestions as to methods of obtaining labor, 
are at all times desired and expected from those in charge 
of the various crews and departments. 

9. Whenever a new man is required to fill an expected or 
an existing vacancy requiring skilled or semiskilled labor the 
foreman should make out a Rquisition for Help, and should 
turn it in at the Employment Office as far in advance as 
possible. This applies for the present to such men as engine 
tenders, machinists, machinists' helpers, electricians, press- 
men, moulders, crew leaders, first assistants, etc. 

10. Demands for common labor will be supplied from the 
reservoir crew in accordance with the existing procedure, 
which is as follows: 

(a) All men needed for the work laid out by the Planning 
Department at 1 :30 p. m. of the day before the work is 
begun must be requisitioned by man-number, before 3 130 
p. m. Schedules are turned in by foremen and crew leaders 
to the Dispatch Office. 

(b) These foremen will enter the man-number of all men 
wanted for the next day opposite the planned job. The 
numbers of all men working on such jobs the day the sched- 
ules are handed in, but who are not wanted again, must also 
be entered but with an X (extra) marked after their number. 
Similarly men previously scheduled but absent the day the 
new schedule is made up must be marked with an A. If addi- 
tional men are needed on a crew, 3 indicate the fact by 
entering a zero (0) in the space you wish to have filled 
with a man-number. 



3 This is in line with the conciliation policy voiced at the 191 9 meeting of the 
National Association Employment Managers' convention, at which P. J. Reilly described 
the Dennison Manufacturing Company's plan for training foremen in the employment 
department and then delegating to them certain elements of employment work and the 
keeping of certain records upon their return to their respective departments. Similarly 
the writer has found it advisable to delegate to foremen certain elements of planning 
and to have them keep certain sorts of records. Such records as schedules for common 
labor are more valuable when prepared by someone in continuous personal touch with 
the workmen than when kept by some clerk in an isolated planning department. This 
plan interferes in no way with the application of written standards. 



PERSONNEL DIRECTION 

(c) The dispatch clerk, in whose hands all Schedules must 
be placed by 3 145 p. m. of the day previous to the morning 
the work planned is to be begun, will make out service cards 
in accordance with the Schedules but will place the cards of 
all men marked X in the Extra Man File, omitting depart- 
ment, operation, account and machine number. 

(d) At 4:30 p. m. the Employment Department will go 
over the schedules listing the men required by the different 
crew leaders (as indicated by the O's). The department will 
then select the best man to fill each such vacancy from the 
availables whose service cards are in the Extra Man File, 
marking in the department, operation, account and machine 
numbers and will place these service cards in their proper 
man-number pocket on the dispatch board so that they will be 
distributed by the dispatch clerks when the men call for their 
service cards in the morning. As the cards are marked the 
Employment Department will replace the shown on the 
schedules with the number of the man selected to fill the 
vacancy, so that the schedules when returned to the dispatch 
office files will be a true and complete statement of just what 
is planned for the following day. 

(e) Foremen who, on the morning the work so planned 
begins, find themselves short a man, owing to the unexpected 
absence of an employee, will at once apply to the Employment 
Manager for a man to fill his place. Such men will be sup- 
plied from the reservoir crew. (Incidentally a glance at the 
dispatch boards half an hour after the plant starts gives 
the Employment Department a graphic picture of just how 
many men are absent from each department). 4 

11. It is expected that whenever executives know that 
an unusual number of men will be needed in the future the 
longest possible notice will be given the Employment Depart- 
ment so that the reservoir crew may be filled to meet the 
need. This is necessary in order to prevent labor shortage 
and also to enable the work for the reservoir crew to be 
planned effectively. 

12. Emergency vacancies occurring suddenly within a 
department -will, of course, be temporarily filled by the fore- 
man rearranging his men to best advantage and then securing 



3 2 9 



'See Chapter IX. 



33° 



AMERICA VS. EUROPE IN INDUSTRY 

from the Employment Department the best man available to 
fill the final vacancy. In order to cause the least amount of 
disorganization at such times all foremen should be urged to 
train "understudies" for all their more important jobs so that 
continuous and efficient operation is not at the mercy of some 
mischance, such as a case of sickness. 

13. In training understudies the foremen and men must be 
made to see that not only is steady operation and bonus in- 
sured under the system but also that promotion is more likely 
if someone is prepared to take over an individual's present 
work when his opportunity arrives. 

14. It is desired that attractive vacancies be filled from 
within the company's organization when possible and the 
Employment Department is prepared to assist in the work 
of selecting and training understudies and to that end will, 
with the assistance of the different foremen, list the various 
positions which each man is capable of filling. 

15. All plant executives are expected to assist the Employ- 
ment Department in picking the best men available for all 
emergency vacancies. 

16. All permanent transfers of men within a department 
should be reported to the Employment Department so that a 
complete and detailed record of each man's experience may 
be kept. 

17. All transfers of men from one department to another 
should be made only with the knowledge of and permission of 
the Employment Department. 

18. All transfers of whatsoever nature, in any way affecting 
the work laid out by the Planning Department, must be made 
only with the knowledge of the chief dispatcher — and with 
the permission of the superintendent, if of an important 
nature. 

19. It is expected that the Planning Department and the 
Employment Department will work as a unit, the former keep- 
ing the latter fully informed of all moves affecting the out- 
put which are likely to affect employment policies. 

20. Foremen are under no circumstances to take men from 
other foremen without the knowledge and permission of the 
Employment Department, nor are they to offer inducements 
to men employed in other departments to leave such depart- 



PERSONNEL DIRECTION 331 

ments without the knowledge and permission of the employ- 
ment department, which will in every case take the matter 
up with all foremen involved. Transfers of importance 
should be discussed with the superintendent. 

21. Promises as to rate or work, except as arranged with 
the Employment Department, must not be made to prospective 
employees by the plant executives. There is no objection, 
however, to any foremen stating current rates to acquaint- 
ances or applicants outside of business hours and of offering 
to speak a good word for them at the Employment Office. 
Such action is welcomed as an assistance to the maintenance 
of the company's force of effectives. 

22. No rate raises will be honored by the Time-Keeping 
Department without the written permission of the superin- 
tendent, the assistant superintendent, the Industrial Engin- 
eering Department, and the Employment Department, the 
Rate Change Notice being used for the purpose. This notice 
may originate as a recommendation in any of the depart- 
ments named. (Note: This leaves the line executives, who 
are responsible for production costs, in control of rate raises, 
but at the same time insures the man's efficiency being checked 
up by the Industrial Engineering Department and his personal 
record being brought to bear on the question by the Employ- 
ment Department.) 

23. Announcement of a raise shall in every case be made 
to the workman by his foreman. (This keeps the workmen 
notified as to "who to be good to.") 

24. The aims of the Employment and Industrial Engineer- 
ing Departments and of the line executives are identical in 
that they all exist for the purpose of turning out continu- 
ously the largest quantity of first-quality product at the least 
cost. An adequate force of contented employees who will 
remain in the Company's employ after they have become 
skilled is essential to this result. The full and permanent 
co-operation of every employee is required and all depart- 
ment heads receiving a copy of these instructions are expected 
to set the example and to work in harmony with each other. 

It is not in any way intended to imply that these instruc- 
tions will cover every situation. Each plant must be studied 



332 AMERICA VS. EUROPE IN INDUSTRY 

separately and the personnel of the existing organization ana- 
lyzed in detail. It has been our experience, however, that 
the reduction of the responsibilities of each department to writ- 
ing, with due regard for the existing psychology of industrial 
human nature, together with the patient education of all con- 
cerned so that they act principally on such motives as they 
are willing to confess before their associates, will remove most 
of the friction attendant upon the reorganization of a plant to 
admit the specialist in personnel. 

So much for the duties of the director of personnel and 
his relation to the plant executives. We have endeavored to 
handle the tabulation of elements from the standpoint of their 
value to industry, from the profit-producing standpoint — im- 
mediate or future 5 — because that is what ultimately determines 
the survival of any addition to modern industry. The last 
four sections — Safety, Sanitation, Education, and General 
Service — will be dealt with in further detail in later chapters. 

Determination of Base Rate 

Employment direction, while intimately connected with 
the elements described in the last four sections, represents the 
activities of the director of personnel which correspond to 
those of the industrial engineer or the production manager 
in the standardization of materials, in planning, dispatching, 
and in working out the time element in rate-setting. The pro- 
duction manager deals with materials, transportation, ma- 



B We are deliberately disregarding the obvious copybook maxim arguments, on the 
assumption that everything which is good for humanity is productive of profit to indus- 
try in the long run. For instance, everyone of any intelligence knows that unhealthy 
working conditions in a generation or two produce workmen who consume nearly at 
much as healthy workmen but whose productive ability is far less. Similarly rank 
injustice results in high turnover (the "individual strike") and in expensive labor 
troubles. Aside from all moral reasons it pays to treat labor justly. It is taken for 
granted that the reader is already familiar with the religious, ethical, and moral 
grounds for treating his fellow-men with respect. I say this because the safety-first 
propaganda at a certain safety-first convention which I once attended consisted almost 
wholly of an appeal to the employers' sense of duty. As a matter of fact an appeal 
to a man's sense of duty is as great a reflection upon his .character as an appeal to his 
sense of honesty. Such things are taken for granted among the right sort of people 
and the time sometimes devoted to long pious statements of high motives is thereby 
saved for consideration of the essentials. 



PERSONNEL DIRECTION 



333 



chines, and with methods and time of processing. The director 
of personnel deals with the workman first as a citizen; and 
secondly as a factor of production. 

In order to contribute to the success of the business— which 
depends upon the production of goods at a cost low enough to 
meet competitors' prices — the duty of the director of employ- 
ment is to furnish the factor which he controls at the lowest 




Figure 55. Chart Showing Actual Result of Personnel Direction in a 
Large Plant During the War 

The work started in May, 19 17, and the installation was completed in October. From 

then on — through 1918 — the turnover varied from 200 to 250 per cent. The majority 

of the workers were unskilled and this final turnover was low for the industry. 

price consistent with operating efficiency and with the per- 
manent welfare of the business. This means that he must 
secure and maintain a working force which is permanent (hav- 
ing a low labor turnover) and which is of a quality that will 
produce the greatest amount of high-quality goods at the 
lowest cost per unit. From this standpoint authorities are now 
pretty well agreed that high-priced labor is in the end the cheap- 
est labor, Under any circumstances it is the duty of the em- 



334 



AMERICA VS. EUROPE IN INDUSTRY 



ployment director to advise the management what base rate 
should be paid in order to secure the grade of labor best suited 
to the particular business with which he is connected. 
This requires an intimate knowledge of : 

1. The local demand and supply of labor. 

2. The wages being paid locally for different grades of 

labor. 

3. The other attractions 6 that competitors in the local 

labor market are offering employees. 

Use of Charts 

This information should be arranged statistically on 
charts. The first chart should show the weekly labor bal- 
ance — the "inflow" versus the "outflow" — at the plant. When 
the balance goes into "the red," investigation is automatically 
forced. This chart should also show whether the loss is made 
up of men who have been employed less than a week, a month, 
3 months, 6 months, a year, etc., as the loss of old employees 
indicates a much more serious condition than the loss of new 
men who may be merely trying out the plant or who may be 
of the kind who work only when broke. It is, of course, as- 
sumed that this information will be examined in the light of 
the conclusions which have been drawn from the monthly 
charts showing the total plant turnover and the turnover 
by departments. 

The second chart should show the wages being paid in 
a dozen local industries where working conditions are similar 
to those in the one in question. This information can be 
secured from the men who apply for jobs each day. 

The third chart should tabulate the non-wage attractions 
of the industry in a column at the left and should rate opposite 



e This includes working .conditions — sanitation, lighting, etc. — housing conditions, 
amusements, co-operative buying, etc. One firm I know of, during the war gained an 
advantage over competitors in the local labor market of nearly a dollar a day by 
establishing a co-operative store at which goods were sold employees at cost. 



PERSONNEL DiRECTION 335 

a dozen local competing industries, according to an arbitrary 
percentage scale similar to that used in rating United States 
Army officers. 

If the employment director studies these charts closely 
each week and keeps in touch personally with conditions 
throughout the plant he will be in a position to advise the man- 
agement just what base rate must be paid for labor in order 
to turn out a product of the highest quality at the lowest cost 
per unit. Furthermore, he will be able to back up his state- 
ments with facts which will convince the most hard-headed 
managements, intent upon the satisfaction of their constituency 
with large, regular, and frequent dividends, and upon the safety 
of the investment. The safe and economical, if not very 
heroic, course is to keep just ahead of the middle of the pro- 
cession of local competitors when wages and other attractions 
are going up, and just behind the middle when they are going 
down, because the tail end of the procession is having labor 
troubles when wages are rising and the vanguard is having 
trouble when wages are going down. Obviously this has 
nothing to do with the solution of the ethical question as to 
how much labor should be paid. That is as difficult as it is to 
decide how much bacon the farmer in the rural market, who 
has slaughtered a hog, should ethically deliver for an egg 
to the farmer whose hens are laying well. The question is 
settled by bargaining, not by ethics. 7 

Fluctuations in Living Costs 

Violent and sudden fluctuations in living costs, such as 
those which took place during the war, can be met by an 
agreement to raise or lower wages in proportion to the rise 
and fall of the various commodity indexes — such as those 



7 The social conscience of the community would, however, be aroused if either 
farmer kicked the other below the belt in the course of the bargain. The same thing 
happens in the case of a strike, because public opiinon asserts itself whenever either 
side indulges in "dirty work." 



336 AMERICA VS. EUROPE IN INDUSTRY 

issued by the Department of Labor, Dun, Bradstreet, etc. — 
although a chart showing local living costs in the districts in 
which the workmen actually live is much safer. There is 
nothing final about this plan, however, as it assumes that the 
base rate upon which fluctuations are figured was correct. As 
a matter of fact that rate itself was undoubtedly established by 
bargaining — individual or collective, depending upon whether 
the plant was unionized or not — not by ethics. 

Qualities Required of Personnel Directors 

The problem of providing and maintaining an adequate 
force of efficient and satisfied workmen and of translating 
their needs and desires to the management in a manner which 
will serve the interests of all parties, labor, capital, and the 
community, as faithfully as did the personal contact between 
master and man in the small shop of a hundred years ago, 
is not an easy one. The director of personnel must be a man 
of broad vision. He must thoroughly appreciate the viewpoint 
of capital, management, and workman. He must Have the 
courage to fight for what is right. He must know how to 
fight tactfully and successfully — how to back up his statements 
with facts. He must be human and he must be systematic. He 
isn't very common, in spite of the fact that nearly every plant 
in America has a clerk whom it calls an "employment man- 
ager." But he is one of the most important factors in modern 
industrial organization and the future of the capitalistic system 
is to a large extent in his hands. 

Personnel Direction in France 

Before I left America a professor in one of our eastern 
universities asked me to find out if employment management 
— something which we were under the impression we had be- 
stowed upon civilization during the war — had been introduced 
into France. He said he had written various booksellers 



PERSONNEL DIRECTION 33^ 

abn )ad but had been unable to secure any literature on the sub- 
ject. At one of the Schneider establishments I spent an 
hour in one of the largest and best equipped employment de- 
partments I have ever seen. As we finished I asked the director 
of personnel — directeur service personnel ouvrier — how long 
the department had been in existence. "Toujours," he replied— 
"always" — meaning somewhere about the time of the Amer- 
ican Revolution! The reason my friend had been unable to 
obtain any literature on employment management was because 
it was such an old story and was taken so much as a matter of 
course that the French had stopped writing about it. 

Employment Methods 

At the entrance of nearly every French plant of any con- 
sequence is the bureau de personnel ouvrier, over which pre- 
sides the directeur de service personnel ouvrier. Here the chef 
d'embauchage and his assistants hire the men, grant them leave, 
and fire them. When a man applies for a job he is questioned 
and the answers are inscribed upon a dossier similar to Figure 
56. It will be noted that they do not miss much, either mental, 
physical, or moral — especially after they have been through 
the man's police record, which he must always carry with him 
wherever he goes in order to avoid arrest and imprisonment 
and which gives a complete record of anything of any import- 
ance which has ever happened to him. The record of his mili- 
tary service is similarly complete and has accustomed him to 
physical examination. Furthermore, men are not hired until 
several of their previous employers have been heard from. 
Altogether the bad actor hasn't much chance. 

If the man passes these preliminary tests he is tested on 
actual work by the foreman of the department in the presence 
of a man from the employment department. If he makes good 
on this he is given a job on probation and eventually becomes 
a full-fledged employee. In case a workman proves unsatis- 



33§ 



AMERICA VS. EUROPE IN INDUSTRY 



factory in one department he is transferred to another by the 
employment department. Men who prove unsatisfactory in 
all departments or who are guilty of serious breaches of dis- 
cipline are sent to the directeur de service and his assistants to 
be discharged. Systematic soldiering is discouraged by dis- 



N. OK DOSSIER 

N- DESCRIPTION SERVICE OU PERSONNEL OUVRIER 
BUREAU DEMBAUCHAGE 



N. DU SERVICE 



Norr. el Pr£nom9 : - 

Dale d'inscriplior. : . 

Age : _. : Ne le 

Elal civil : _ 

Lieu de nai998nce i 

Domicile de I'ouvrier 

Domicile de la famille : 



Membres de la famille occupSs A 111 


,me : ■ 




Se ce militaii 




t ' • 


ro ession 










SERVICES ANTERIEURS 


ET 


RENSEIGNEMENTS 


DIVERS 















AVIS DE LA DIRECTION 



NOTE MEDICALE 
1" VISITS 2* VIS1TE 


8« VISITS 


Acuile visuelle ■ D 


D 




D 
















Abdomenei orgapesgenitaux: 














































Sorvice .... 
Eniree .... 
Profession . . . 

Sortie 

.Profession . ■. . 
'Capacity . . 
Conduile. . . ■ 
Prix de joiirnee . 


MUTATIONS 


1 



































































Observations < 




Entr4e 

Profession . . 
Sortie . .... 
Profession . . 
Capacite . . 
Conduile ' . . . 
Prix de journee 
























































_ , 













I 


Observailoos I , 


1 4° 


' 


Categoric : Tilulaire, Auxiliaire, Journalier 



Figure 56. French Application Blank (face and reverse) 

charge — after it is proved to the workman, by another work- 
man, that the job can be done in a certain time. 

Industrial Relations 

As a result of this system you find the grandsons of the 
original workmen, who were hired when the plant started, still 
on the job. Furthermore the normal labor turnover is 10 or 



PERSONNEL DIRECTION 339 

12 per cent per year. During the war this increased somewhat, 
but at such plants as that at Le Creusot, where good houses 
were available and coal plentiful, it remained around 20 per 
cent. In the forgeshop at Le Creusot, which employes 3,800 
men, the turnover was running at 10 per cent and at 15 per cent 
in the rolling-mill at the time of my visit. 

The employment of women on all sorts of work during 
the war developed some interesting problems with which the 
personnel department had to deal. In one plant the chef de 
service told me that the foremen had to be specially trained in 
diplomacy. 

It is necessary for the foreman to speak little when the 
women in the department are many, Monsieur. A hard 
forewoman also is a much better director of the work than 
a gallant man. Furthermore it is advisable for the superin- 
tendent to recommend the largest wages for the ladies from 
the largest families. It is well also to hold converse with 
the most acidulous ladies and to discharge the beautiful ones, 
is it not, Monsieur? It was in fact a most difficult industrial 
period, Monsieur, but then it was the war. 

Italian and German Methods 

In the larger Italian plants the director of employment does 
the hiring and firing in a manner similar to that in France. 
The usual practice is for the foremen to recommend discharge 
but for the employment department to do it. 

In Germany the usual practice is for the employment de- 
partment to secure such men as are required from the govern- 
ment employment offices. Their record is then entered on a 
card (see Figure 57) and the candidates are sent to the fore- 
man to be tried out. If they prove unsatisfactory they are dis- 
charged. In one large plant I found that it was the rule to send 
an unsatisfactory workman to one of ten departmental manag- 
ers. The employment department usually handles the work- 
man's insurance records and the physician, who by law must 



340 



AMERICA VS. EUROPE IN INDUSTRY 



Kontr.~Nr._ 



Zuname 



Vorname 



geboren am. 



18 in 



gelernt- 



Ort 
beschaftigt als_ 



Land 



_verheiratet?_ 



in AEG Betrieben von bis Kranken-Buch Nr. . 

" " Werkzeug-Marken-Nr. 

" " Garderoben- N.r„ 



Eintritt am. 



mit Pfg. Stundenlohn 



seit 


















neuer Stundenlohn 



















Wobnung_ 



Austritt am. 



Grund 



Figure 57. (a) German Employee's Record (face) 



Strafen 


Tag 


Grund 


Tag 


Grund 


































































































































1 









Figure 57. (b) German Employee's Record (reverse) 



PERSONNEL DIRECTION 



341 



spend at least an hour a day at the plant, sometimes holds his 
clinic in a section of the employment department. 

One of the peculiarities of the German system is a long 
list of penalties for infringement of various shop rules. For 
instance in one plant it costs 15 pfennigs to come from 3 to 5 
minutes late. If you are from 6 to 10 minutes late it costs 
you 25 pfennigs — nearly half a cent. If you don't stamp 
your clock card you are penalized 25 pfennigs, and so on 
through a long list. About the most extravagant thing you 
can do is to "smoke in repetition in the courts or buildings," 
which costs half a mark. All these penalties are recorded upon 
the back of the employee's record card (Arbeiter-Personal- 
Karten) under the heading of "Strafen'' so that it is possible 
to see just how law-abiding a person he is at any time. 

A similar system is in use in a number of taxicab com- 
panies in America in which a definite and worth-while bonus 
is set up and then diminished by various penalties for infringe- 
ment of rules which vary from "wearing non-uniform gar- 
ments" to "not assisting elderly people, women, children, and 
cripples" and "chewing tobacco while on duty." Theoretically 
a workman is better off if he knows just what disobedience is 
going to cost him than if he never knows whether the boss 
when he catches him smoking will fire him or ask for a cigar- 
ette. Actually there is a popular prejudice in America against 
fines and against the "tattling" which is necessary if fair and 
complete records are to be kept. 

In Germany very complete instruction books are furnished 
the newly engaged workmen, which contain full information 
in regard to what is expected of employees entering the estab- 
lishment. Employees' record cards of various sorts, discharge 
tickets, and leaving tickets such as are found in America are 
in use. (See Figure 58.) There are also special forms cover- 
ing war-time relief matters — as the allowance of 9 marks for 
an employee's wife and 18 marks per child each week, etc. 



342 



AMERICA VS. EUROPE IN INDUSTRY 



Personnel Direction in England 

Going over on the "Mauretania" I sat at the table of the 
chief staff engineer, a man whose duty it was to hire, lire, 
and otherwise discipline the mechanics and stokers employed 
below. The chief engineer of the ship attended to the purely 
technical phases of keeping the machinery in motion, while 




Figure 58. Forms Used in Personnel Direction in Germany 

my friend was the director of personnel — a part of the organi- 
zation that developed on the larger ships of the Cunard Com- 
pany during the war. In a large steel plant in England the 
principal assistant to the works director told me he did not 
believe in employment management or personnel direction as 
practiced in America. A brief discussion of his duties devel- 
oped the fact that he was director of personnel without being 



PERSONNEL DIRECTION 



343 



aware of the fact. He had simply run across a few of the 
ridiculous statements made a number of years ago by some of 
the uplifters who fancied themselves as leading industry out 
of Egyptian darkness into the Promised Land and had rejected 
the whole thing as nonsense. 

Well-organized employment; departments 1 — as such — are 
rarer in England than on the Continent. There is quite often 
a director of personnel who attends to everything except the 
hiring and firing. Very often he is known as the ' 'educational" 
or "safety director" — as he sometimes is in America. 8 Such 
men are more than likely to tell you that employment manage- 
ment, as practiced in America, "would never do with us, be- 
cause taking the right to hire and fire entirely away from the 
foreman would ruin discipline." When they find that this 
phase of employment management was only transitory in 
America (see section, "Standard Practice Instruction," in 
early part of this chapter) and that, as really practiced, the 
foreman has absolute authority in his department, they are 
quite willing to admit that employment management is per- 
fectly feasible. 

In fact the right of discharge was taken away from the 
foreman in a number of English industries years ago, although 
I believe that the condition in most industries in Great Britain 
is much as it was in America ten or fifteen years ago, except 
perhaps that thorough unionization gives the individual work- 
man a certain amount of protection against the arbitrary and 
frankly brutal type of foreman. Specific clauses providing 
against "victimization" are at any rate usually inserted in most 
treaties of peace after strikes. 



Comparison of programs of the annual meetings of the National Safety Council, 
the Industrial Relations Association of America, the National Association of Corpora- 
tion Schools, the Society of Industrial Engineers, the Taylor Society, the American 
Society of Mechanical Engineers, and of some of the other national societies inter- 
ested in hygiene and education will show that the area of the fields of industrial activity 
of the various bodies which overlap is greater than the area which belongs distinctly 
and wholly to any single professional activity. Fortunately this has so far resulted in 
co-operation rather than jealousy and an attempt to establish caste barriers. 



344 



AMERICA VS. EUROPE IN INDUSTRY 



Some Actual Practices 

In one plant employing over 5,000 people, which is con- 
sidered a model of enlightened management and which pos- 
sesses a good many of the elements of scientific management, 
foremen have not been allowed to fire employees for a good 
many years. Offenses against discipline are dealt with by a 
tribunal made up of management and employees. Personal 
service records are kept of all employees, upon which are 
entered all offenses and all constructive suggestions. These are 
consulted when raises, promotions, or discharges are consid- 
ered. Transfers from one department to another are made by 
the plant superintendent's office. New employees are secured 
from the labor exchanges and certain tests and a medical exam- 
ination are given. After a period of instruction by the educa- 
tional department the candidates for jobs are put to work on 
probation. Very complete rule books are presented to new 
employees. The plant has an annual labor turnover of 1 1 per 
cent. 

At another plant discharges are made on recommendation 
of foremen to a director of the company. The plant has a 
combined employment and educational department under the 
supervision of a director. Increases in pay are made on the 
basis of personal record cards every six months on regular 
dates. Tests for new workmen were being devised at the 
time of my visit. The printed works rules set forth prin- 
cipally the various welfare activities open to employees. A 
money bonus — up to 3 days' wages — is paid for punctuality. 
Out of 18 departments 9 had had neither a lateness nor an 
absence for a year. 

The director of personnel at a large steel plant was in 
charge of all the phases of industrial relations— schools, safety, 
labor committees, etc. — which such a man would supervise 
in America, except the hiring and firing, which was done by 
the foremen. At another steel plant in which there were no 



PERSONNEL DIRECTION 



345 



APPLICATION CARD. 


EMPLOYMENT DEPT. 


APPLICATION 


WRITTEN 1 PERSONAL 


SUGGESTED BY 


TRADE, POSITION. OR WORK MOST 
SUITABLE 


DATE 


! 




FULL KAMS OF 
APPLICANT 


(......ME FIMT) 


ADDRESS 
IN FULL 








ACE 


DATE OF BIRTH j SINGLEOR MARRIED 1 No OF DEPENDENTS 

1 


ANY PHYSICAL OEFECTS 


WAGE WANTED 


WHEN ABLE 10 START 


TRADE UNION 1 WORKED HERE BEFORE 
IN OEPT 


EVER RECEIVED COMPENSATION? 




PLACE PERIOD 


COURSE ICERT^CA^SGA^NED.OR | BESTSUBJECT 


WORST SUBJECT 


SCHOOL 


| 


1 
1 




EVENING SCHOOL 






1 






APPRENTICESHIP 1 










PRESENT AND PREVIOUS 
EMPLOYERS 


POSITION 


PARTICULARS OF WORK DONE 


WAGES 


LENGTH 

OF 
SERVICE 


DATE LEFT 


REA90N 


REFERENCES 


















































.. ■■ ' = — 



Figure 59. (a) An Application Card Used in England (face) 





PHYSIQUE, 
Etc 


ACTIVE 


STRONG 


MOUTH BREATHER 


FLUENT 


WELL DRESSED 


GOOD TEMPERED 


CONFIOENT 


TALL 


HEALTHY 


EYESIOHT 


TIDY 


CHEERFUL 


TEMPERATE 


LIKELY TO 
CONTROL OTHERS" 


EXPERIENCE. 

Etc 








MANNER 






GENERAL 

IMPRESSION 

AND 

REMARKS 










Any Relatives 
Who Work Here 












RESULT 




TO START IN DEPT. 


HOURLY, WEEKLY OR 
MONTHLY PAIB EMPLOYEE 


INSURABLE PT. 1. 


RATE 


AGREEMENT 


INTERVIEWED BY 


DATE 


GRADING SYMBOL 


INSURABLE PT. II. 





Figure 59. (b) An Application Card Used in England (reverse) 



346 AMERICA VS. EUROPE IN INDUSTRY 

evidences of personnel direction of any sort and where safety 
engineering, works council schemes, and the like were con- 
sidered impractical and theoretical, absenteeism ran< from 
4 to 10 per cent in different departments. Morale was ex- 
ceedingly bad and the labor turnover was not figured. 

The most complete industrial relations department I en- 
countered was in a large plant famous for its progressive and 
successful management. The absenteeism averaged 2^2 per 
cent and the annual turnover 25 per cent. Each employee's 
record was kept in a separate folder on the outside of which 
were printed the more important facts in regard to him. In- 
side this were separate cards covering his rate record, attend- 
ance record, wage deduction record (for goods purchased, 
etc.), wage record, application card, etc. The employment 
department also took care of departmental transfers, filled 
requisitions for new employees, and took care of the various 
educational, safety, and welfare interests. In fact the depart- 
ment was quite as well organized and complete as any I have 
ever encountered, as will be seen by reference to the forms 
shown in Figures 59 and 60. At another plant employing 8,000 
people, safety and welfare were especially well organized, al- 
though employment was still largely in the hands of the fore- 
men. The labor turnover amounted to 27 per cent annually. 
At another plant the educational feature predominated. 

Restoration of Personal Contact 

There is no question but what the tendency in England is 
toward the restoration of personal contact between employer 
and employee through industrial relations departments under 
some type of director of personnel. He is variously named 
and anything that savors of weakening the foreman's author- 
ity is regarded with great suspicion, but the progress toward 
specialization is steady. We have already mentioned the 
removal of executive offices from London to the factory cen- 



/ 1 



PERSONNEL DIRECTION 



347 




REQUISITION FOR ADDITIONAL. EMPLOYEES 



EMPLOYEES' RATE REGOR 



:!%©¥ , SE S S RS.0OROS. 



Figure 60. Forms Used in an English Employment Department 



348 AMERICA VS. EUROPE IN INDUSTRY 

ters. That is simply another phase of the trend toward the 
restoration of personal contact. 

Personnel direction — employment management, safety, and 
welfare work concentrated under one or more specialists — 
is simply the natural development accompanying the growth 
of the industrial unit from the four- or five-man shop of 
Franklin's day into the vast aggregation of workmen which 
exists today. It is the method of restoring personal contact 
between worker and owner. The more nearly the principles 
which guided the old workman-owner and his employee in 
their relations — mutual respect, fairness, and real democracy 
— can be preserved, the less class hatred, industrial warfare, 
and all that makes for mutual loss and sorrow will exist. 



CHAPTER XIV 

ADMINISTRATIVE AND EXECUTIVE CONTROL 

Influence of Stockholders 

Recently I heard a group of very able educators discussing 
the tests that were given army officers, from the standpoint 
of their use as a gauge of ability for industrial executives. The 
charts shown indicated that the proportion of minds which 
yielded a high intelligence test increased as the rank of the 
tested increased — that there were more class A minds among 
the majors than among the lieutenants, the corporals, or the 
private soldiers. It was argued that an army officer was an 
executive — why not then apply the army tests to industrial 
executives? Some time that may be possible but it is doubt- 
ful if the higher executives, the administrators, will be so 
chosen until the men who own the industries are similarly 
chosen. 

A dozen or more years ago I used to take my govern- 
mental panaceas to an ex-cabinet officer who handled the firm's 
legal business. He would listen patiently and then say wearily : 
"That's all very well — you've got a fine idea, but remember 
that this is a democracy — that the majority rules — and that 
you can't put over anything that the majority aren't educated 
up to." It is the same in industry. The policy of every com- 
pany is controlled by the men who own the company — by the 
men who own the majority of the stock. Consequently the 
ideals of each corporation are no higher and no lower than the 
ideals of its stockholders. The president and general manager 
is the visible sign of authority but it is his constituency, the 
men who elected him — the stockholders — who have the say 
in the end, just as surely as it is the United States senator's 

349 



35° 



AMERICA VS. EUROPE IN INDUSTRY 



constituency who eventually decrees whether he shall return 
to Washington for another term or whether he shall seek 
the comparative obscurity of a long-neglected law practice. 
The corporation president and the United States senator both 
know this and govern themselves accordingly. We must re- 
member the fact whenever we become impatient to reform 
politics or to reform industry. 

Gain as a Motive 

Stockholders are just as human as the rest of us. When 
we buy a share of oil stock we are more interested in knowing- 
how soon it will begin to pay a ioo per cent so we can buy a 
motor-car than in knowing whether the well-driller owns a 
Ford or walks. What goes on inside a company does not usu- 
ally claim the attention of the ordinary stockholder unless 
there is a public scandal or unless the company ceases to pay 
dividends. What every manager knows is that he is secure 
as long as nothing disagreeable gets in the papers and just as 
long as the dividends which his corporation pays are sure, 
frequent, and large. 

The motive was gain when the first little group of Baby- 
lonians gathered together their goods and entrusted them to 
the leader of a caravan some thousands of years before Christ. 
It was the same when Spain sent forth a caravel. It is the 
same today. The risk of losing our capital is not as great now 
and the leader of the enterprise can no longer flay his lazy 
workmen alive. But if there were no chance of gain why 
should you and I and the other men in the street invest our 
savings? Much as we may instinctively recoil from ''base 
commercialism" we must face the fact that industry was, and is, 
organized to pay dividends upon invested capital, and that 
until there is a radical change in human nature this will quite 
probably continue to be the raison d'etre of industrial organi- 
zation. 



EXECUTIVE CONTROL 351 

Public Approval 

Such being the case, the wise general manager endeav- 
ors so to conduct the business that it will earn the largest pos- 
sible dividends compatible with the retention of public approval. 
It is no longer profitable to work men sixteen hours a day. 
It is inadvisable to employ children. Reasonable sanitation 
and safe working places earn dividends. Since education has 
become general and since — thanks to the press — what is done 
is generally known, it pays to have a good reputation. The 
"lower selfishness," which tries to elbow its way violently 
aboard a crowded street-car and acquires a bloody nose in the 
process, has been replaced by the "higher selfishness," which 
bows low and says, "After you, my dear Gaston," and is there- 
upon, for very admiration, invited to ascend first. But an 
awful lot of public service corporations got bloody noses be- 
fore they replaced "the public be damned" with "the public 
be pleased." Only the other day I spent two hours with the 
president of one of our largest coal companies, who told me 
how all during the shortage of 1920 he had held the price 
of his coal down to the point where it paid a reasonable divi- 
dend and had taken care of his regular customers at his regular 
price when he was offered sometimes six and ten times as much 
by frantic manufacturers. He is now cashing in on the good- 
will so created and earning good dividends while the companies 
which profiteered are flat. He is the wise administrator; he 
treats his men well and he lives up to his word but he hasn't 
any illusions that he is running a charitable institution or that 
he would hold his job very long if he did not produce dividends 
for his stockholders. 

Factors in Industrial Organization and Operation 

There has been less effort made in this country to differ- 
entiate between the administrator and the executive than there 
has abroad. Over there the administrator is the man who 



352 AMERICA VS. EUROPE IN INDUSTRY 

shapes policies, while the executive is the man who carries 
them out. Lloyd George is the typical administrator; Kitch- 
ener was the typical executive. The administrator gauges the 
public, analyzes the situation, and, aided by staff workers, 
develops a policy of action. The executive, aided by his line 
executives, forces this action. 

In business, lines are not ordinarily so closely drawn but 
from the following analysis of the activities of those respon- 
sible for the formation and operation of a corporation it will 
be seen that administration is a distinct function even though 
it is not always relegated to any particular person: 

1. The entrepreneur or promotor, who discovers the eco- 
nomic need which justifies the existence of the business. He 
may be an inventor like Edison, a mechanical genius like Ford, 
or a trader like Astor— -but he must be able to dream dreams 
and to make others believe in them, and in him. He may not 
be an organizer but he must have the idea and the courage to 
force it upon others. 

2. The stockholders, who have sufficient belief in the enter- 
prise to be willing to deny themselves the immediate and cer- 
tain pleasure of dissipating their savings for the less certain 
future pleasure of securing interest without diminishing their 
principal. 

3. The directors, who are the representatives elected by 
the stockholders to watch over the security of their capital 
and to insure that it earns the largest possible dividends. 

4. The president of the corporation, who is placed in direct 
charge of the business by the directors. His duties ordinarily 
are largely administrative and consist of devising ways and 
means to attain the objects for which the corporation was cre- 
ated. It may be his duty to secure and weld together the organ- 
ization — those who are to man the corporation as it becomes 
a going concern. 

5. The general manager, who is appointed by the president 



EXECUTIVE CONTROL 353 

to carry out the policies determined upon. 1 His duties are 
largely executive and he is the chief "line officer." It is his 
duty to hold the organization together and to see that it func- 
tions smoothly. He is really a psychologist. 

6. The staff, consisting of specialists of every variety — 
lawyers, engineers, personnel directors, chemists, geologists, 
and all sorts of research men — who furnish the management, 
consisting usually of the president and the general manager, 
with facts about the business which enable them to formulate 
policies and carry on the business successfully. Staff officers 
also assist the line executives directly. The work carried on in 
the planning department is principally a staff operation and 
certain sorts of functional foremen are staff men even though 
they possess a certain amount of line authority. 

7. The line, which comprises all the executives of the 
company and which is responsible for getting things done — 
sales managers, factory managers, financial managers, super- 
intendents, and foremen. 

8. The rank and file, 2 which consists of all those who actu- 
ally process material or who do the routine clerical work 
necessary to sales and production. 

Lessons from Russia and Italy 

Apparently there is something more to industry than labor 
— consisting of manual workers — and capital — consisting of 
buildings, engines, and tools. Every manufacturer has known 
this for years but it required the Russian and Italian experi- 



KJrganizations differ with every business. The president and general manager are 
sometimes the same person. Sometimes the general manager runs the factory and 
sometimes he manages the sales. We are simply endeavoring to describe a charac- 
teristic organization in such a way as to make clear the reason for the existence of 
the offices and the duties which must be performed by some officer of a corporation. 

2 There is really no clear line of demarcation between the lower order of staff and 
line officers and what is ordinarily known as "labor," or the working force. It is 
rather a difference in the proportion of head work to hand work. It is, however, not 
at all fair to call the manual laborers "the workers," as everyone knows who has 
actually climbed the ladder from manual laborer to manager that the amount of work 
done by the former is mere child's play as .compared with that undertaken by the 
latter. 



354 



AMERICA VS. EUROPE IN INDUSTRY 



ments to demonstrate the fact to the dreamers and radicals 
of the world. These experiments were not without a certain 
value in other respects, as they furnished the despotic employer 
with an example of what might happen when the rank and file 
were uneducated as to the value of anything except the tools 
of industry and manual labor, and when they were badly 
treated. It is unfortunate, but a bloody nose seems to be the 
only thing that will teach either the extreme autocrat, or the 
extreme member of the proletariat, that the higher selfishness is 
more profitable than the lower. The stability of capital as 
well as the stability of labor — and incidentally both dividends 
and wages — depends upon the education of the majority — the 
stockholders and the rank and file — to a point where violence 
is not required to teach either group that mutual respect and 
fair treatment pays best in the end. 

Elements of Control 

Administrative and executive control may be said to con- 
sist of: 

i. The statistical analysis of the objects for which the 
business was created. 

2. The establishment of standards of attainment covering 

such objects. 

3. The determination of the laws which actuate humanity 

— the development of the science of managing men. 

4. The development of the ability to make men react in 

accordance with such laws — the acquisition of 
the art of managing men. 

5. The discovery and establishment of the most effective 

organization structure — devising and enforcing the 
organization chart which best fits the personnel of 
the organization to the physical structure of the 
industry. 



EXECUTIVE CONTROL 355 

6. The establishment and perpetuation of the control 

mechanism : 

(a) Standardization. (See Chapter VIII.) 

(b) Planning and dispatching. (See Chapter IX.) 

(c) Rate-setting and incentives. (See Chapter XI.) 

(d) Personnel direction. (See Chapter XIII.) 

7. Reward of all concerned — from stockholder to laborer 

— in proportion to the degree in which the standards 
of attainment are realized. 

1. Objects of the Business — Ideals 

Before we turn to the material aims of the corporation a 
word should be said in regard to ideals. I do not mean pious 
prating about invested capital as "a hostage to fortune for the 
good of humanity" or similar hypocritical outpourings. Per- 
haps men should be in business for their health but the fact 
remains that most of us aren't. At the same time neither are 
we all out to screw the last cent out of the widow and the 
orphan. The majority of men in business have quite definite 
and decent ideals — ideals which could honestly be printed in 
large letters over their office doors without serious damage 
to themselves or to the business. Much harm is often done 
to a firm by unscrupulous employees who misunderstand the 
firm's policy. A crook always suspects everyone else of being 
crooked. A great many firms are therefore committing their 
ideals to writing and discussing them with their salesmen and 
with their factory executives. 

Furthermore there is a growing belief among the far-see- 
ing administrators of the larger concerns that the possession 
of vast capital does entail a responsibility to humanity. In- 
dustry is getting so big that serious doubts of the rights of 
private ownership of public utilities are found in capitalistic 
as well as in socialistic circles. The spirit of service, I know, 
is growing among our greater administrators and executives. 



356 AMERICA VS. EUROPE IN INDUSTRY 

The rights of workmen and the rights of the public are receiv- 
ing a consideration at the hands of business men that they 
never received when the prosperity of only a small percentage 
of the population was dependent upon the prosperity of indus- 
try. Industrial leadership is coming to mean wide industrial 
service, and industrial service is rapidly becoming service to 
all humanity. We must not forget this in giving consideration 
to the practical ways and means which are discussed in the fol- 
lowing paragraphs. 

Profits 

Normally the amount of profit earned by any business de- 
pends upon four fundamentals : 

1. The cost to produce. 

2. The cost to sell. 

3. The sales price obtained. 

4. The quantity sold. 

In order to control these fundamentals certain facts must 
be known to the administrator. In order to serve his con- 
stituency he must realize certain principles and he must receive 
detailed information regularly as to just what occurs. 

Wherever possible, administrative decision and executive 
action should be based upon facts rather than upon opinion. 
Facts of sufficient accuracy to warrant important decisions 
affecting the policy of a company cannot be collected at a 
moment's notice. Since the management is likely to be called 
upon at any time to make decisions upon which perhaps the 
existence of the business depends, the maximum and continuous 
prosperity of the business necessitates an easily accessible store-, 
house of facts upon which the decisions of the management may 
be based. 

Furthermore, an exact knowledge of conditions, and in 
consequence the timely applications of praise or of construe- 



EXECUTIVE CONTROL 



357 



tive criticism, is one of the chief forces of the management 
in securing results satisfactory to a company's stockholders. 
Undeserved and spasmodic criticism of department heads in 
either the sales or operating departments is unjust and destroys 
initiative. Unmerited praise renders the executive ridiculous 
in the eyes of his subordinates. Either practice is bad for dis- 
cipline and weakens the power of management. 

Statements and Reports 

Statements of profits, of sales, and of production costs 
are an unjustifiable burden upon the business unless they aid 
actively in the administration of the business. If such state- 
ments reflect conditions which existed at some remote period 
they have only historical interest and are of little other value. 

The time of men at the head of any large corporation is 
limited. It is therefore necessary to arrange the facts per- 
taining to the business in such order that the most vital will 
come to their attention automatically and with sufficient insist- 
ence to make it impossible to avoid reaching the necessary con- 
clusions. Such facts should also be presented in the order 
of their relative importance. If this is not done there is always 
the danger of attaching undue importance to some isolated 
and unusual mischance which circumstances have forced upon 
the attention of the management, as well as the danger of miss- 
ing entirely some vital fact which has not been reached for lack 
of time. 

In order to judge the effect of a change of policy or to 
decide upon a new policy it is necessary to have access not 
only to sufficient detail but to detail arranged in such a way as 
to reflect the effect of any policy upon all departments affected 
as well as upon the profits as a whole. 

Too many managers give thought only to what comes to 
them, assuming that matters not mentioned by subordinates 
must be in satisfactory condition. This assumption is very 



358 AMERICA VS. EUROPE IN INDUSTRY 

dangerous, as the subordinate is more likely to mention some- 
thing which will please the boss than something which may 
bring down censure upon his head. The successful departmental 
head learns very early to cover up his mistakes and parade 
his successes. That is human nature — taught us as children 
when we were first punished because our shortcomings were 
observed by authority. If each subordinate knows that he will 
be judged upon a basis of results obtained rather than upon 
the basis of the personal impression he makes upon the boss 
the time or two he happens to meet him during the month, 
that knowledge is the best stimulant to a sustained effort to 
accomplish what is important to the prosperity of the business. 

2. Standards of Attainment — Budget Systems 

The future can be predicted only by a study of the past. 
It is impossible to develop a satisfactory budget system, one 
that will give anything like an accurate estimate of how much 
you will need to spend in the future, unless you. know what 
sums you have spent for similar things in the past and under 
what conditions you were called upon for the expenditures. 

The practice of budgeting expenditures several months or 
a year ahead is now too well established to require detailed 
comment. It is based, of course, upon an advance estimate 
of the probable market for the product. In some businesses 
this is comparatively easy ; in others it is practically impossible. 
The attempt is always worth making, however, because, even if 
the guess is wrong, the future has at least been considered in 
much greater detail than where a business is run on the hand- 
to-mouth principle. 

To my personal knowledge American industries differing 
as widely as a watch and clock company of international repu- 
tation, a building material company, a coal mining company, 
and a concern making machinery for the mechanical handling 
of all sorts of products have been successfully operating under 



EXECUTIVE CONTROL 



359 



a budget system since before the war. The treasurer of One 
of them told me that while 1914 upset their budget entirely, it 
saved them thousands of dollars by enabling them to foresee 
the steps which they would have to take to meet the chaos of 
the first year of the war, long before they would otherwise 
have given consideration to certain aspects of the matter. 

Sales Quota 

The estimate of the market for a manufactured product 
rests upon the establishment of the district sales quota. The 
difficulty of doing this varies with the type of business. For 
example, it is comparatively easy to secure the statistics in 
regard to the number of automobiles of each class in each coun- 
try from the list of licenses issued. From such a list it is fairly 
easy to arrive at the annual consumption of tires and gasoline 
per annum. The share of this business which a particular con- 
cern may look for depends upon such factors as its plant capa- 
city, sales ability, and so forth. Some of the market investigat- 
ors will even determine how much soap or breakfast food of 
a particular class a certain district should take. Everyone who 
has classified replies to advertisements and the results of can- 
vassing and demonstrating campaigns knows that such fore- 
casts are not as impossible as they might at first seem. The 
advertising counselors have been engaged in this work for years 
and recently the universities and the engineering societies have 
been taking it up. 3 Where no such information is available it 
is customary to adopt the output capacity of the factory or of 
the mine as a sales quota — and to form plans for the disposal 
of all that can be turned out. 

Cost and Profit 

Once the standard output is tentatively arrived at it is 
comparatively easy to estimate from past records, the expendi- 



3 See 1921 Transactions of Taylor Society and of Society of Industrial Engineers, 



360 



AMERICA VS. EUROPE IN INDUSTRY 



ture for labor, for material, and for overhead. A sales price 
is then set and the profit is naturally the difference between 
the cost to manufacture and sell and the sales price. 

At this point the "practical manufacturer" — if he has not 
given up in disgust chapters ago — will ejaculate "preposterous" 



130 
120 
110 
100 

90 
80 
70 

60 

50 

40 

30 

20 

10 



'16 '17 '18 

Oct. Nov. Dec. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June July 






























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Figure 6i. Chart Showing the Result of Scientific Executive Control 

in One Plant 

and hurl the book at the cat. If he thinks that the statement 
just made means that a man can in this way guess in advance 
every year exactly how much his profits will be, he is quite 
right in his disbelief. Even at that, I know the comptroller of 
a very large company who has bet his associates $ioo that his 
estimate of the concern's profits for 1921 will be within 1 per 



EXECUTIVE CONTROL 361 

cent of a certain figure. However, the value of budgeting is 
not so much to be derived from always guessing exactly right — 
if you can be sure of doing that every time I would suggest 
that you take up stock gambling or horse racing — but from 
foreseeing months ahead where you are coming out if you 
don't alter your policy. The man who figures just what the 
present rise in labor and in materials will do to his profits six 
months hence, is much more likely to alter the price or to alter 
the plan of sales campaign in time to please his stockholders, 
than the man who doesn't know where he is coming out until 
he is handed a statement of earnings the day before the annual 
meeting. Perhaps you cannot always show a 19 19 profit, but 
with a budget system which shows you just how much and 
just where you are falling down, months before the year 
closes, you are much more likely to administer your business 
successfully than where you figure such things unsystematically 
when you happen to think of it or after they have happened. 
One public utility company I know has worked out a for- 
mula by means of which it can show the public service com- 
mission exactly what every change in wages, in material 
costs, or in rates will do to its earnings. The president of one 
of our largest coal companies has been predicting his profits 
so closely for years that you would almost think his charts — 
showing the actual in contrast with the estimated, were ex 
post facto affairs if you didn't know better. This sort of thing 
is being done regularly in some of the largest American con- 
cerns and the return is well worth the trouble. 

Control Charts 

The standards set should be indicated on the various con- 
trol charts. In fact an administrative chart without a line 
indicating the standard to be attained — the course the business 
should follow — is almost as valuable to the man steering the 
business as a nautical chart without a line indicating the course 



362 



AMERICA VS. EUROPE IN INDUSTRY 





g'£rto ( cs§ g 3g't3o5 


$100,000 

90,000 

80,000 

70,000 

60,000 

50,000 

40,000 

30.000 

20,000 

10,000 

















































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Figure 62. Cumulative Expense Chart 

the ship should take, would be to its navigator. The line may 
not be exactly followed in each case but common sense demands 
that you plan where and by what route you are going before 
you start — especially if the safety of others depends upon a 
safe voyage. It is not our purpose to go into details as to the 
types of charts best adapted to this purpose. The cumulative 



EXECUTIVE CONTROL 



363 



expense chart (see Figure 62) is exceedingly valuable. By 
means of that and the type shown in the profit chart (see 
Figure 63) almost any facts can be shown graphically. 4 

3 and 4. The Science and Art of Managing Men 

Besides its statistical aspect there are two other aspects 
of administrative and executive control. One is the philo- 
sophical aspect — the conscious or unconscious investigation and 



$70,000 
60.000 
50,000 
40,000 
30,000 
20,000 
10,000 


Jan. 
Feb. 
Mar. 
Apr. 
May 
June 
July 
Aug. 
Sept. 
Oct. 
Nov. 
Dec. 


















































































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Figure 63. Profit Chart 

classification of the motives which actuate our fellow-men, 
together with the technique of operation of such motives. It 
is necessary for both the administrator and the executive to 
know in a general way what will be the effect of certain words 
and acts upon the public and upon their organization. They 
must have a knowledge of real human nature, not of ideal 
and non-existent beings dwelling in the mist of a far-off Utopia, 
but of common ordinary real human beings — the kind that 
Machiavelli, Bacon, La Rochefoucauld, Lord Chesterfield, and 



4 See also four articles by the writer entitled "Scientific Administration" which 
appeared in the July, August, September, and October numbers of the Engineering 
Magazine in 1916. Also the eleventh volume of the Industrial Extension Institute's 
Factory Management Course, entitled "Executive Statistical Control.". 



364 AMERICA VS. EUROPE IN INDUSTRY 

Ed Howe describe — practical people who really want to get on. 
In addition to a general knowledge of real human nature 
the administrator and the executive must be able to diagnose 
each individual case and to treat the subject in such a manner 
as to secure the reaction desired. Every successful school 
teacher knows that certain boys must be inspired, before they 
will really try to do their best work. The diffidence of one 
must be overcome by kindly reasoning. Another must be 
shown, in horrid colors, what will happen when examination 
time arrives. To the lethargic must be forcibly demonstrated 
the advantages of activity. The same difference of qualities 
which makes one instructor send forth a class eager to work 
while another dismisses his boys in a thoroughly numbed con- 
dition, makes one man a successful executive, while everybody 
hates to work for another. Like almost every human endeavor, 
management consists in part of a science and impact of an art 
or technique. There is the knowledge of how men should be 
managed and the ability to put such knowledge to actual use. 
A man must possess both if he would be a successful executive. 5 

5. Mechanics of Organization 

Aside from the philosophical aspect — although perhaps 
closely related to it — there is the matter of mechanics of organ- 
ization. This has to do with the type of structure which best 
fits the personnel of the organization to the physical structure 
of the business. It necessitates an analysis of the business 
from the standpoint of departments, processes, and professions 
or trades. 6 Its visible sign is the organization chart. The 
preparation of this chart requires a careful study of the busi- 
ness and of the administrative and executive material available. 
The chart should first be drawn up from the standpoint of 



"In this connection we advise careful study of "Developing Executive Ability," by 
Dr. E. B. Gowin, and "Business Administration," by Edward D. Jones. 

e See article in Administration, May, 1921, by Clinton E. Woods, "The Practical 
Organization of Industry." 



EXECUTIVE CONTROL 365 

following the flow of the various raw materials through the 
plant, department by department, with due regard for the vari- 
ous types of work performed at each stage. This very survey 
often brings to light many possible economies of operation 
which may be affected by rearrangement and reorganization. 
The plant should then be so divided that responsibility can be 
absolutely placed for everything occuring in every department. 

Functionalization 

It is usually advisable to functionalize in so far as the plac- 
ing of responsibility will permit. That is, the more closely 
the rule of placing all of one kind of work under one man is 
followed, the more skilled each man becomes in his specialty 
and the more intensive treatment each branch of the work se- 
cures. Just as soon, however, as functionalization is carried 
to the point where there is doubt in the mind of the workman 
as to just which one of the functional foremen giving him 
orders is his boss, the advantages of functionalization begin to 
be offset by lack of discipline. By careful study most of the 
advantages of functionalization can be secured, under the mili- 
tary departmentalized type of organization, by the application 
of staff service under the direction or with the approval of the 
foreman who is responsible for the conduct of the department. 
For instance, the foreman of a certain department may have 
his machines set up by men under the master mechanic, who 
also sets up machines in other departments. The set up may be 
according to standard instruction cards devised by the engineer- 
ing and time-study departments, and the tools may be ground 
at the toolroom and delivered to the machine together with 
material as directed by the planning department. Nevertheless 
the foreman may be absolutely responsible for all that happens 
in his department and rightly expected to secure credit or blame 
for the results so long as he doesn't protest as regards the 
service any of the staff enumerated furnishes him, 



366 AMERICA VS. EUROPE IN INDUSTRY 

Relation Between Staff and Line 

The relation between staff and line is sometimes very subtle. 
Some men function sometimes as staff and sometimes as line. 
Take for instance a repair man under the master mechanic 
doing a job for a department foreman. The master mechanic 
has line authority over his repair man, who must do what he 
is told as regards the method of repairing the machine — al- 
though the foreman's advice may be asked. At the same time, 
with respect to the department foreman, the work is "staff" 
or, if you prefer the term, "service" work requisitioned by 
him and really bossed by the specialist who is the master 
mechanic. Similarly the planning clerks are pure "staff" so far 
as the factory goes but they are under the direct orders of 
the production manager and are therefore "line" in so far as 
he is concerned. The whole planning department may be un- 
der the shop superintendent, who is a line officer, or it may be 
under the general manager. In some of the larger companies 
the industrial engineer is pure staff and acts as staff officer to 
the president. This is the case in one of our largest motor 
company consolidations, where each factory manager has his 
own industrial engineer but calls on a member of the presi- 
dent's staff for advice and assistance. It is not so necessary 
to define staff and line exactly in every case as it is to recognize 
the general distinction — the staff for research and investiga- 
tion, the line for action — and then to arrange matters so that 
the responsibility for everything — whether good or bad — can 
be placed exactly. 

"Responsibility for" is much more important than "author- 
ity over." Unless this fact is recognized an organization oper- 
ates with vanity instead of service as its motive power. When 
the personal vanity of the executive is the driving force, jeal- 
ousy replaces co-operation and mutual assistance, corporation 
politics consumes the energy of the personnel which should be 
devoted to making the business successful, and the result is low 



EXECUTIVE CONTROL 367 

morale and stagnation. It is unthinkable that a man should be 
empowered to give orders without assuming the responsibility 
for the effect of such orders. This axiom must be understood 
and subscribed to by every executive from straw boss to presi- 
dent, if an effective organization is to be secured. 

Corporate Authority 

Another fruitful source of difficulty is the confusion of 
corporate authority with line and staff authority. Corporate 
authority is such authority as is vested in certain offices created 
when a company is incorporated and is usually defined in the 
charter, the articles of incorporation, or the by-laws. The 
president of a company, as a corporation officer, presides at 
directors' meetings, the vice-president presides at such meetings 
in his absence, the secretary keeps the minutes of the meeting, 
and the treasurer technically is in charge of all moneys and 
securities of the company. These officers may in addition func- 
tion as line or staff officers, but unless it is plainly understood 
that their titles as corporate officers give them no authority 
whatsoever in the staff and line organization there is likely to be 
constant friction. When a certain great public work was com- 
pleted one of the men responsible was made general manager 
of a large corporation. The owner of that corporation had 
some half-dozen beautiful daughters, each of whom had ac- 
quired a husband of social distinction. Each husband had been 
provided for in the business by the donation of a vice-presi- 
dency. They were all long on authority and short on experi- 
ence and sense of responsibility. As a result they made it so 
impossible for the general manager that he resigned after 6 
months' of interference and the company lost a much needed 
competent executive. It is always much less expensive to pay 
the incompetent sons and sons-in-law a salary to keep away 
from the business than it is to make them vice-presidents and 
then fail to make it clear to them that corporate authority, 



$68 AMERICA VS. EUROPE IN INDUSTRY 

as such, begins and ends at meetings of the directors and stock- 
holders of the corporation. 

Very often, however, corporate officers function also as 
line executives. In order to avoid confusion it should be under- 
stood, however, that any executive authority exercised is sub- 
ject to the control of the president as chief executive of the 
company and is under the direction of such executives as are 
associated with him in what is usually known as ''the manage- 
ment" which constitutes the continuous, active, executive head 
of the corporation. 

The Executive Organization 

The line organization — which it will be remembered is 
the executive organization, the men who are responsible for 
action, for carrying out the policies decided upon by the admin- 
istrative officers, for the attainment of the standards set — is 
so arranged that under all circumstances there is an officer in 
command whose orders are to be obeyed at once and without 
question. 

This makes it imperative that each member of the organi- 
zation, regardless of his title, have definite superiors and defin- 
ite inferiors in order that he may know from whom to accept 
orders and to whom he may give orders. Once such lines of 
responsibility are established each executive knows the depart- 
ments for whose efficiency he will be called to account. 

Any other type of executive organization means conflicting 
orders, industrial politics, recrimination and blame-shifting, and 
all the inefficiency which goes with ill-defined lines of authority 
and responsibility. Furthermore, action can be secured much 
more quickly when it is necessary to go to only one superior for 
orders than when several must be seen in order to insure against 
censure. Discipline is maintained since the workmen know 
from whom orders are to be respected and find out that they 
cannot go over their superior's head merely for the pleasure 



EXECUTIVE CONTROL 369 

of telling their boss "where he can get off" when he reproaches 
them for not carrying out his own orders. 

It requires self-restraint among superior officers who have 
been in the habit of giving orders direct to the workmen where- 
soever they pleased, not to give such orders — especially when 
directions are asked for by the men. The only way discipline 
can be maintained is for each line executive — except of course 
in the case of accident — to refuse to give any orders whatso- 
ever except to the executives immediately under him. He is 
at perfect liberty to question, to discuss, and to take note, but 
the order for action must come through the regular channel. 
In this way only can initiative be developed and real assistance 
be secured from those under you. You must respect each 
boss's authority if you expect his men to respect it. The only 
way this can be accomplished is to refuse to give orders either 
directly or by implication except through the channels indicated 
on the organization chart. Such a chart is shown by Figure 
64 and several of the principal divisions are explained here- 
with. 

Explanation of the Typical Organization Chart 

The Management. In the case of the large corporation 
the president, who as administrator and chief executive has 
accepted the responsibility for the successful conduct of the 
business, must necessarily secure assistance. To that end he 
hires certain executives to be associated with him in his work. 
These men, who together with the president are in active 
charge of the company's affairs and who are empowered to 
render all decisions as to policy and action not specifically 
reserved for the board of directors, comprise what is known 
as the "management." The decision of the management is 
final and in important matters is usually rendered after con- 
ference. In the case of the absence of a member of the manage- 
ment, those present should inform hirn fully upon his return 



370 



AMERICA VS. EUROPE IN INDUSTRY 




2 r 



EXECUTIVE CONTROL 



371 



in order that subsequent decisions may be rendered in the light 
of full knowledge. 

The General Manager. The general manager is appointed 
by the president and is directly in charge of the details of 
the company's business. He is responsible only to the presi- 
dent and directs the sales, engineering, purchasing, employ- 
ment, auditing, and manufacturing departments. It is his duty 
to secure competent heads for these departments and to see 
that the work is conducted in such a manner that the profits 
of the business will at all times be maintained at the maximum. 

Executive Aides. In any large concern there are always 
various matters requiring intensive study and attention. At 
such times the management should be empowered to secure 
assistance and to delegate executive powers to those most com- 
petent to handle the situation. For instance, the settlement 
of certain legal claims may be delegated to a lawyer, a geologist 
may be empowered to direct certain mining operations, or a 
corporate officer may be induced to- take charge of a serious 
traffic situation or a material shortage. Such executive pow- 
ers should, however, in order to avoid conflict of authority, 
be delegated only in writing and for a specific period. In all 
cases copies of such orders should be sent all line executives 
affected. 

Advisory or Staff Authority. In order that the line organ- 
ization may have at its disposal the knowledge of those special- 
ists whom increasingly complicated industrial problems have 
made necessary, the management of the large modern cor- 
poration adds to its organization temporarily or permanently 
certain staff officers. It is the function of such specialists to 
advise as regards a certain field, leaving the management to 
act as it sees fit. The lawyer advises regarding a legal situa- 
tion, the laboratory furnishes data in regard to a mix, and 
the geologist brings in a report in regard to a new ore field. 
Similarly the industrial engineer and the personnel director 



372 AMERICA VS. EUROPE IN INDUSTRY 

make certain written recommendations. Such of these as meet 
with the approval of the management are signed and thereby 
converted into executive orders, which are transmitted to the 
departments affected through the usual channels. This staff 
is purely advisory as regards the line officers and is responsible 
only to the management. It is organized for detailed study and 
recommendation rather than for action and is designed to 
furnish continuous and detailed assistance to the line. The 
exact relation of line to staff in this particular case is shown 
by the chart. 

Fitting the Chart to the Personnel 

In working out an organization chart quite as serious 
consideration must always be given to the personnel of the 
available officers as to the ideal organization structure. The 
first thing to do is to draw up the ideal organization chart show- 
ing the positions to be filled. The second thing is to determine 
what human material you have or can get to fill these positions. 
The result is always a compromise. When it comes to scrap- 
ping a valuable employee or a pretty plan the wise man always 
scraps the pretty plan. One of the oldest installations of 
scientific management in America threw out certain phases 
of functional foremanship because it did not utilize to the 
utmost the talents of one of their most valuable men. The 
very young man insists on fitting the organization exactly to 
the chart. The veteran in industry knows the value of every 
tried employee and alters the chart enough to utilize his 
services to the utmost. The rule is : Draw up the ideal chart. 
Analyze your organization. Fit them together with the least 
loss to each, but always give the man the benefit of the doubt. 

6 and 7. Control Mechanism and Rewards 

Technical control is usually a matter of technical instru- 
ments placed at the disposal of workmen whose reward is in 



EXECUTIVE CONTROL 



373 



proportion to their attainment of fixed standards. Figure 65 
shows an example of such control. The pyrometer at the left 
indicates the temperature of any one of twenty furnaces when 
the furnace operator throws the switch to the furnace number. 
Such readings taken at regular intervals are entered by the 
furnace operators on the long sheet shown on the slide in the 
foreground. The times at which the pyrometric cones melt, 




Figure 65. Combination of Technical Control with Statistical Control 

Bonuses are based upon quality of product and upon coal, output, and labor saved. 

certain draft and gas readings, and notes in regard to general 
conditions are also entered on this long sheet by the actual 
furnace operators. Instructions for 24 hours issued by the 
planning department and approved by the technical chief each 
afternoon at a planning meeting, are entered in the open book 
shown at the right. The closed book shows the detailed re- 
sults of each heat, together with certain special information 
required to link cause with effect in sufficient detail to allow 
mistakes once made to be avoided in the future, and gains in 



374 



AMERICA VS. EUROPE IN INDUSTRY 



quality, fuel, and furnace turnover to be analyzed and made 
permanent. The graphs on the wall show the current attain- 
ment of standards of labor, quality of product, and fuel econ- 
omy so that the furnace operators know just where they stand 
as regards efficiency bonus. 

Graphic control of manufacturing operations has been de- 
scribed in connection with the chapter on planning. The 




Figure 66. Mechanism of Planning 

The work tickets in the pockets indicate just what is being done and the next job 
planned for each man. The "Excess" division shows each foreman at 9 a. m. how 
many men in excess of normal are at work in his department. The control charts 
at the right indicate the passage of various jobs through the different departments. 

mechanism employed in planning is further illustrated in Fig- 
ures 66 and 67a and b. 



The Planning Organization 

The planning organization depends upon the nature of 
the business. There is no doubt that at one time there was 
a tendency toward overcentralization. Later a certain reaction 
set in. The main feature of the change is the removal of as 



EXECUTIVE CONTROL 



375 




Figure 67. (a) Control Chart 

Close-up showing progress of individual jobs through the various departments. The 
color of the pin denotes through which department the jobs are passing. The location 
of the pin shows the number of tons which have passed and which are still to pass 

through the department. 




Figure 67. (b) Control Charts 

These graphs are fastened to drawing boards which may be removed from the racks 
to facilitate the work of keeping them up to date. 



376 AMERICA VS. EUROPE IN INDUSTRY 

much of the planning work as possible from the central plan- 
ning and control office to departmental substations in charge of 
the departmental foremen, the central station retaining only- 
general authority as to methods and issuing such general ord- 
ers as are necessary to insure a steady flow of the incomplete 
parts from department to department. The responsibility for 
the conduct of each substation is placed directly upon the fore- 
man of the department and the clerks therein are his employees. 
The result of this is the development of the foreman, whose 
interest and sympathy are naturally enlisted more strongly for 
the plans which emerge from his own department, than where 
cast-iron plans are imposed upon him from some central con- 
trol office filled with young clerks for whose knowledge of 
shop conditions and human nature he has no respect. The 
result is to utilize to the utmost that experience and loyalty 
which those who know intimately the sterling qualities of that 
much maligned but mostly honest individual — the foreman of 
American industry — have long felt deserved recognition. 

While such a movement is good psychology there is always 
the danger — especially in the case of reaction — of going too 
far. An excerpt from a recent letter on this subject received 
from Colonel George D. Babcock illustrates what I mean. 

Where, due to a variety of processes, foremen have charge 
of a comparatively limited number of men, and especially 
where the variety of parts and number of mechanical opera- 
tions are great, and when these parts must go through other 
departments and eventually enter single complex assemblies, 
any tendency toward decentralized control of the order of 
work for the parts, or of the fixtures and equipment or ma- 
chinery necessitated in their preparation, will increase "work 
in process" inventories and cause a material unbalance of 
production as compared to the direct instruction as to pro- 
cedures from the central controlling or co-ordinating division. 

Due to the variety mentioned, affecting the opportunity for 
the foremen to specialize in processes on particular machines, 
or the possibility of securing a large number of foremen who 



EXECUTIVE CONTROL 377 

have all of the mechanical qualifications necessary for the 
conduct of the work, and as well the highly technical knowl- 
edge involved in intensive planning and despatching, decen- 
tralized planning will not make for the homogeneous relations 
of the organization or of product. 

When in an industry, different units of the product are pro- 
duced in sufficient quantities so that each unit of product may 
be set aside under decentralized control, and the various 
functions and processes can be economically applied, or where 
the product itself is manufactured on a strictly progressive 
basis, the parts having the same routing through the same 
machines continuously, it is obvious that central control is 
limited to merely the co-ordination of operations of the 
various departments particularly applied to the entrance and 
exit of its material. 

Centralized control or decentralized control is not a matter 
of choice, but rather a matter controlled by the factors in 
in the business, none of which has a greater effect than the 
quantity of each finished unit which is to be produced for sale. 

A Successful Method 

A method that is strongly recommended is to put the 
responsibility for the conduct of the department absolutely 
up to the foreman, and then have all the planning possible 
done in a departmental planning office by a clerk who is under 
the orders of the foreman as regards everything except plan- 
ning methods. These methods are controlled by written in- 
structions prepared by the industrial engineer on the staff of 
the general manager, and signed by the general manager after 
being OK'd by the foreman and the plant superintendent. 
All planning which cannot be done to advantage by the depart- 
mental planning offices is done in the central planning depart- 
ment. Each morning the force of the production manager or 
of the chief dispatcher in the central planning office works out 
the general plan for the next day in detail. This is what is 
known as the "best" plan. He also at times prepares certain 
alternate plans "nearly as good." At 1 o'clock each depart- 



378 AMERICA VS. EUROPE IN INDUSTRY 

ment foreman surveys the situation in his departmental plan- 
ning office. At 2 o'clock he comes into the central planning 
department for the ''general planning meeting" where he 
looks over and OK's his section of the general plan and dis- 
cusses mutual problems with the other foremen and the plant 
superintendent. The superintendent then OK's the whole plan 
and the foremen return to their departments before 3 o'clock 
with complete orders for the next day. This permits the 
gang bosses to make out their labor schedules 7 requisitioning 
any extra labor, etc., by 4 o'clock so that the work tickets for 
the individual workmen may be completed and placed in the 
dispatch boards (see Figure 66) before the dispatch clerks go 
home that evening. 

This plan is extremely flexible inasmuch as it allows as 
much or as little centralization as is necessary but at the same 
time gives the foreman his day in court in such a way as to 
enlist his co-operation. Furthermore it stimulates his interest 
in planning by permitting him absolute authority over such 
departmental details as can be safely left to him without upset- 
ting the general plan which controls the flow of material from 
department to department. At the same time it prevents 
changes in the system by irresponsible parties and piles up 
the full force of the general manager's orders behind the sys- 
tem. The foreman is freed from clerical detail but is furnished 
with the detail he should have in order to conduct his depart- 
ment effectively. Under this system the amount of planning 
done in the central office and in the departmental offices will, 
of course, vary with every business. Personally I firmly be- 
lieve that the principle of delegating as much authority as pos- 
sible to the man in personal touch with what is happening from 
hour to hour in the shop is the right one. Just how much 
authority is the right amount must be worked out carefully 
and dispassionately for each type of industry. 



7 See standard practice instructions, Chapter XIII, 



CHAPTER XV 

ADMINISTRATIVE AND EXECUTIVE CONTROL 

IN EUROPE 

Objects of Continental Businesses 

In Chapter III the organization structures (5) 1 in use in 
Europe were discussed briefly. The control mechanisms (6) 
in use were discussed in subsequent chapters on planning, etc. 
On the Continent I found very little doubt in the minds of 
business administrators as to the objects for which business 
was created (1). The first object was the earning of divi- 
dends. The second object was to put one over on the ancient 
business rival in another country. Especially were the allied 
countries out gunning for Germany who before the war stunted 
their own industrial growth by dumping quantities of German- 
made goods upon their home market at prices with which they 
were unable to compete. Patriotism has become almost as 
great a motive for business activity abroad as the desire for 
profits. 

France 

The science 2 of managing men (3) is given considerable 
attention in France — not so much as a part of business train- 
ing as in the light of an interesting topic of conversation. We 
have already referred to the disclosures of a certain French 
employment manager in regard to his rules for managing 
women (Chapter XV). I couldn't find any industrial litera- 
ture on the subject but much has been written by the psycholo- 



1 For an explanaticn of the numerals used in this chapter, see page 354 et seq. 

2 The science of management is the science of psychology — as taught by Ladd, 
James, etc.; the art of management is the science in action — as practiced by such men 
as Schwab. 

379 



380 AMERICA VS. EUROPE IN INDUSTRY 

gists and by the philosophers from the days of ancient Greece 
to the present day. 

The art of managing men (3) is highly developed in France 
— perhaps more than in any other country. The proof of that 
lies in the almost utter absence of labor troubles since the 
war while every other country, including America, has been 
torn with strife. It also lies in the French reputation for polite- 
ness and tact. The French were the first to discover liberty, 
equality, and fraternity and they were the first to find that 
the higher selfishness — courteous treatment of one's fellow- 
men — pays better than the lower selfishness, which emulates 
a crowd of pigs all trying to monopolize the bucket at once. 

Germany and Italy 

In Germany the system has been to figure out methodically 
what sort of men make the best cogs in the various wheels 
of industry and then educate the children to be that sort of 
men. Italy's system is in process of development, that develop- 
ment has been sharply stimulated by the object lesson of last 
August, which proved pretty conclusively to even the most re- 
actionary that the previous methods needed revision. Courtesy 
to the subordinate must be learned in Italy before real co- 
operation in industry can be secured. 

England 

England — in so far as I was able to learn in the time at 
my disposal — has gone much further in the statistical analysis 
of the objects for which the business was created (1), in the 
establishment of standards of attainment covering such objects 
(2), in the development of organization charts (5), and in the 
reward of all concerned in proportion to the attainment of 
such standards (7), than the continental countries, with the 
exception of Germany. Even in England, however, such work 
has been confined principally to a few bright lights like the Hans 



EXECUTIVE CONTROL IN EUROPE 381 

Renold Company, Moreland and Impey, Cadburys, Metropoli- 
tan Vickers, certain Armstrong and Whitworth plants, the 
Spirella Company, etc. With the majority of firms adminis- 
trative and executive control, as described, is purely an art in- 
herited with the controlling interest or acquired in the battle 
for survival much as it is in America. One such director in- 
formed me that they "drew up an organization chart once, 
but that there were so many damn lines on it by the time we 
figured out just how many people were giving orders to each 
foreman, that we tore the damn thing up." 

An exceedingly interesting method of co-ordinating mate- 
rial and financial direction by means of cumulative charts (see 
Figures 62 and 63, pages 362, 363) and of predicting profits in 
a manner similar to that described in the previous chapter, has 
been worked out by F. M. Lawson and is described in the 
second chapter of his book. 3 

An English Firm's Organization Chart 

The managing director of one of the most progressive 
concerns in England presented me with his personal copy of 
the firm's organization chart. It is in the form of a well- 
bound gy 2 x 13J4 loose-leaf binder containing ten sheets of 
heavy linen paper 13x16 upon which the organization chart is 
printed. The organization is of the departmentalized military 
type with staff in control of certain functions and in principle 
closely follows the chart shown by Figure 64 (page 370) . The 
arrangement is as follows : 

Main Organization Chart. This chart (see Figure 68) 
shows at the top the "board of directors," containing names of 
governing director (chairman of the board) and of the com- 
pany secretary. From this a line leads down to the "managing 
director." The labels in each case contain the name of the 
man in charge of the department and the account number. 



8 Lawson, F, M., Industrial Control, Sir Isaac Pitmann and Sons, Ltd. 



382 



AMERICA VS. EUROPE IN INDUSTRY 




EXECUTIVE CONTROL IN EUROPE 383 

Under the managing director are the works director, the sales 
director, and the finance director. Incidentally the plant 
(works service, and purchase and supplies) and the employ- 
ment departments report direct to the managing director. 

JJnder the works director are two material departments — | 
the head of one reporting to the head of the other, who is the 
assistant works manager — an inspection department in charge 
of the works manager — departments A (heavy), B (light), 
and C (miscellaneous), each under a senior superintendent — 
an output department and a design and tool department (to 
which the machine and tool department is subsidiary). 

Under the sales director there are departments of develop- 
ment and publicity, home sales, export and branch offices, 
each with a separate head. 

Under the finance director is the finance department. 

Divisional Organisation Chart — Works Director. This 
chart gives the detail of the departments under the works di^ 
rector, and is shown in Figure 69. 

Divisional Organization Chart- — Selling. This chart gives 
the detail of the departments under the sales director, whose 
name appears in the top label opposite a label containing the 
names of the men comprising the sales council. 

The first main branch is marked "development and pubf 
licity department" and is presided over by a manager and a 
deputy. Beneath are the departments for non-standard applif 
cations, designs and patents, and publicity, each under a chief!. 

The second branch contains the home sales, stocks, and del 
livery department under a manager and a deputy. Below 
appear the sales engineers, clerical, merchandise stocks, pack- 
ing; motor transport, and some special product sales depart^ 
ments. 

The third branch contains the branch offices departmental, 
with a chief in charge of a number of branches in various 
principal cities of Great Britain. 



384 



AMERICA VS. EUROPE IN INDUSTRY 












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a 


= ; 




q 




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a 






















" tn 


5 
















Cc 







-f 








* *3 


a > 




3 ' 






c 


pj ' 




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Sa 



so 



r.3 — 

I 2 



EXECUTIVE CONTROL IN EUROPE 385 

The fourth branch — marked "export" — is under an assist- 
ant manager and a deputy. 

Divisional Organization Chart — Finance. Under the fi- 
nance director is an assistant manager in charge of finance. 
He is assisted by the cost accountant, who is directly in charge 
of the: 

1. Accounts — company accounts and taxes, sales ledgers, 

vouchers. 

2. Tabulator. 

3. Costs and wages, costs and prices, departmental ac- 

counts, and pay-roll and service 

4. Cash and records — pay-roll records, petty cash, and 

telephones. 

Divisional Organization Charts — Plant. This chart gives 
the detail of the work directly under the managing director. 
The plant is under an assistant manager, who is in charge of 
the following branches : 

1. Purchase and supplies under the purchasing agent, who 

has charge also of the order editing, supply record, 
general stores and scrap-handling departments, and 
the central receiving station. 

2. Plant development and design department. 

3. Works service under a senior superintendent, whose 

duties cover supervision of : 

(a) The garage. 

(b) The plant running, maintenance, and shops. 

(c) Electrical. 

(d) Pattern-making. 

(e) Domestic services. 

(f) Lodge. 

(g) Furnace and general, bricksetters, laborers, join- 

ers, and plumbers, 
(h) Order of work, finance, stores. 



386 AMERICA VS. EUROPE IN INDUSTRY 

Divisional Organisation Chart. Under the managing di- 
rector, who is directly in charge, are : 

1. The employment manager, who is responsible for can- 
teen, clerical, first-aid, sick suspension, education, and con- 
tinuation schools. 

2. The assistant manager for women employment who is 
in charge of the women in the departments enumerated under 
the previous heading (canteen, etc.) 

3. The social secretary and stationery departments. 
Sectional Organisation Chart — Design and Tools. The 

organization of the tool and design department is shown in 
Figure 70. 

Charts have been drawn up also for the three plant depart- 
ments under the works director, each of which manufactures 
a different class of product. The most interesting feature of 
these charts is the relation between the functional lines and 
the direct authority lines. The direct authority lines show 
the subdepartments into which each of the five or six principal 
departments is divided. The functional line, which is the 
same on each chart, parallels these lines and is connected with 
each of them by means of dotted lines at the point where the 
functional or staff assistance flows into the main line, in much 
the same manner as is shown on Figure 64. In the English 
charts the staff assistance departments are marked "Inspection," 
"Manufacturing Output," and "Finance." 

Comparison of the above description with the organization 
chart (Figure 64, page 370) will show the main points of dif- 
ference between the British and the American practices. These 
are principally differences of nomenclature. The extensive and 
careful sales organization should be especially noted as well 
as the inspection, the planning, and the research organiza- 
tion. 

The method of drawing up and binding the chart is 
worthy of notice as it makes consultation and filing easy and 



EXECUTIVE CONTROL IN EUROPE 



387 




3 88 



AMERICA VS. EUROPE IN INDUSTRY 



permits each department to post 4 its own chart without posting 
the whole set of charts. 



Delivery Dates 

In another British plant I found charts showing the per- 
centage of delivery dates promised that were exactly kept each 









CD 








<u 
























3 




3 




















3 




PQ 




PQ 


CD 

3 




PQ 










m 








Red N 




Red H 


-..Red "■ 




jv 'Red, • 




^UEpjfi^ 




iH 













Figure 71. Charts Showing Percentage of Delivery Dates Kept 

"Blue" indicates number of orders filled as promised. 
"Red" indicates promise broken once in month. 
"Purple" indicates promise broken twice in month. 

month. In no case were promises broken by more than a day 
or two, but standards were set showing the most desirable per- 
centage of attainment for each class of goods. It had been 
determined that 95 per cent of some classes of goods should be 
shipped exactly on time, while 90 per cent was sufficiently high 
(when orders were heavy) on others. For instance, a man 
whose factory is shut down because he is waiting for an engine 



4 It is customary to post .charts on the walls of each department. 



EXECUTIVE CONTROL IN EUROPE 389 

repair part is ordinarily much more upset if it arrives a day 
late than a man who has ordered a part of a machine tool or a 
monkey wrench. These charts are arranged as shown in Fig- 
ure 71. 

The same firm carried charts showing the standard prom- 
ised time in days and the actual delivered time each month on 
each sort of order. Furthermore a printed loose leaf was sent 
all salesmen each week, showing the delivery time they were 
safe in promising on each variety of goods and the amount of 
stock of each already on hand. 

Sales Quotas and Departmental Charts 

Furthermore the country had been divided up very care- 
fully into small districts, sometimes two or three in a large 
city, and the boundaries marked on the British ordnance 
maps, which are extremely accurate and complete. Sales quotas 
were then set for each district, based upon how much of the 
sort of product manufactured by the company was consumed 
annually by each firm in the district. From this and from the 
factory's capacity, output and profit standards were set. 

This company had a home sales manager, a foreign sales 
manager, and a planning sales manager, who, together with 
the director of sales, made up the sales committee. Plans were 
under way for the routing of salesmen, much as it is done in 
certain plants in this country, where a schedule showing the 
time of arrival at each town — the customers to be visited at 
each, etc. — is worked out before the salesman starts out on his 
trip. 

A cost chart is kept which shows graphically each month 
the fluctuation in the cost of producing each article. Further- 
more departmental charts are kept showing the monthly effi- 
ciency of each department, the per cent of men on efficiency 
bonus, and the per cent who should have been on bonus. (See 
Figure 72.) 



'39° 



AMERICA VS. EUROPE IN INDUSTRY 



Classification of Executives and Clerks 

An interesting organizational feature of this plant was 
the division of the clerical and executive force into three 
classes. Staff A 5 consists of those earning £400 a year and 
up and having been with the company six months, and of some 




Figure 72. British Departmental Chart 

"Blue" represents the per cent of the total number of men in the department who were 

on bonus, "Green" the per cent of the men engaged in non-productive work, "Red" 

the per cent of the men who were not on bonus but who should have been. 

others who because of responsibility of position held and for 
certain other reasons are declared eligible by the directors. 
Staff A employees have a three weeks' vacation, the right of 



B In England the word "staff" is used to designate clerical or non-manual employees. 



EXECUTIVE CONTROL IN EUROPE 



391 



election to the suggestions committee, and each morning reg- 
ister their time of arrival at the plant in a book. Staff B must 
earn 30 shillings a week, have two weeks' holiday, and must 
punch the time-clock upon arrival. Staff C are juniors earning 
less than 30 shillings a week and have only 10 days' vacation. 
At another plant the office staff were not only classified 
into A and B but wore special uniforms of black and gray 
striped material. The foremen wore blue uniforms, the deputy 
foremen white uniforms with blue ties, and the charge hands 
white uniforms with pink ties. 

Decentralization 

The plan found in one plant of furnishing the sales, pur- 
chasing, and factory managers departments, each with a lab- 
oratory, has been referred to in a previous chapter. This 
same plant placed all shipping under the sales department, 
which is responsible for all damage due to improper packing. 
The sales department buys from the factory at a fixed price 
and so shows a profit based upon the prices secured. 

Each superintendent has his own inspectors as well as his 
own planning department. The effect of this, I was told, is to 
enlist his co-operation to the utmost — inasmuch as he regards 
the inspectors as "his men" rather than as spies upon his work 
or clerks from an alien department. The managing director of 
this plant told me they were "just recovering from a bad attack 
of overcentralization," and that while they were retaining their 
central planning department to plan and dispatch work from 
department to department and to supervise all planning in a 
general way, they had transferred to the departmental plan- 
ning offices every bit of planning and dispatching which could 
be so decentralized without loss of planning efficiency. This 
method is carried still further. Each departmental foreman 
has also his own inspectors, who are more inclined to assist 
him to devise ways and means for the avoidance of defects — • 



39 2 



AMERICA VS. EUROPE IN INDUSTRY 



so my guide told me — than if they were under a separate de- 
partment. The work of these inspectors is checked in the final 
inspection where the inspectors are under the works director. 
There is no question as to the soundness of the psychology of 
decentralization. The danger, as in the case of all reactions, is 
that the decentralization will be carried to a point where the 
individualism and inertia of the various foremen will so weaken 
the central planning that the shop will revert to the inefficiency 
of the foreman-controlled shop of the past. 

Sales Policies 

At another plant I found that the statistical department had 
divided the country into sales territories by postal districts. 
This is, after all, a most logical division, as postal districts are 
based upon transportation conditions and the shipment of 
goods and the travel of salesmen are governed by the same 
conditions. Sales, defined as "shipment from stock," are al- 
ways credited to the man to whom the territory is assigned, 
by weight as well as by values. Statistics are compiled as to 
prices obtained in each territory. Salesmen are paid commis- 
sion in proportion to the profitableness of each product sold 
and in proportion to the difficulty to sell. A chart is brought up 
to date each week showing the sales, the amount manufactured, 
and the stock of each variety of product. Costs covering each 
variety are prepared monthly. 

Graphic Control 

The private office of the managing director of one large 
plant was lined with blackboards upon which each week were 
charted the actual departmental production vs. departmental 
production standards, and figures showing the sales by districts. 
Charts of this type were also kept up weekly. (See Figure 73.) 

A budget system was in effect by which the monthly ex- 
penditure of each department and the monthly profit which 



EXECUTIVE CONTROL IN EUROPE 



393 



each should make was figured out six months in advance and 
departmental heads were each month given a statement show- 
ing how nearly they had attained standard. 

In the engineering trades administrative control of this 
sort is rare. Nevertheless in going through such plants there 
are very often evidences of an awakening. In a large steel 




Figure J3. Weekly Production Chart 

"Cycle Hours" represent the total possible machine hours if all machines were operated 
at standard speed. Causes of shutdowns during planned time are shown as follows: 
"Green" represents breakdowns, "White" no power, "Black" transmission. *On 

actual production basis. 

plant I found charts posted up in the various departments show- 
ing the monthly output and the cumulative average production 
by weeks. In another plant I found a similar chart and was 
told that the foremen were becoming interested in it. 



Increasing Importance of Organization and Administration 

Business is becoming too complicated and incorporated 
units have become too vast to make it possible for the super- 



e Semiprocessed work is valued on a machine-time basis. 



394 



AMERICA VS. EUROPE IN INDUSTRY 



man to control longer an industry by the force of his person- 
ality and of a physique which enables him to work 18 hours 
a day. The captain of industry today must devote his time 
to organization and administration, depending upon a carefully 
organized staff to supply him with facts and a well-organized 
and well-trained executive force to act in accordance with the 
conclusions as to policy into which he transmutes such facts. 
Someone once said that the one quality which above everything 
else made Lincoln the leader of his country's destiny was his 
ability to secure the facts, to digest them thoroughly, to think 
the complicated problems through to a correct conclusion, and 
then to express this conclusion in a few simple words which 
even the humblest could understand. Lincoln was the true 
type of administrator — for the industrial administrator of vast 
enterprises must no less stand before his public and before his 
constituency. He is responsible for the well-being of thousands 
— stockholders, executives, workmen, professional men, shop- 
keepers, and their families — and his success or failure will 
depend upon his ability to envision ideals, to secure facts, to 
arrive at correct conclusions, and to convert his conclusions into 
acts. He has need of every method of control ever devised 
and the greater he is, the more quickly he is realizing this — 
whether he live in America, England, France, Italy, or Ger- 
many. 



CHAPTER XVI 

SELECTION AND EDUCATION OF EMPLOYEES 

Neglect of the Human Factor 

The most important factor of industry — the human factor 
— has only just begun to receive the attention it deserves. The 
war forced upon the attention of even the most obtuse the ne- 
cessity for conserving man-power and for making every muscu- 
lar unit produce the utmost result. The problem was attacked 
from the mechanical side by the introduction of devices which 
enabled the weak to do what only the strong had previously 
been able to accomplish. It was attacked from the standpoint 
of incentives to work, and from the standpoint of health and 
sanitation, in order to enable each unit to function as effectively 
as possible. Units were selected with greater care with respect 
to their fitness to perform each sort of work. Last but not 
least, serious attention was given to the education and training 
of the man for the job. 

Previous to the mechanical revolution, man performed the 
work for which centuries of evolution had fitted him. Manual 
and dorsal labor at low speed kept the physique he had inherited 
from the land apes in proper working order. With the intro- 
duction of machinery a hundred years ago man undertook a 
type of labor for which evolution had not fitted him. The 
result was at first appalling. Fourteen or sixteen hours of 
slow exertion in the open air, with periods of rest and con- 
versation, continued through a few months in the year — the 
life of the farmer of a century ago — is not particularly injuri- 
ous to the human frame. Fourteen hours' work a day in a fac- 
tory, begun when the workman was seven or eight years old, 
continued the year round under unsanitary conditions, pro- 

395 



396 AMERICA VS. EUROPE IN INDUSTRY 

duced in the second and third generation human monstrosities. 
There is a reason for the difference in physique and men- 
tality of employer and employee in England. The experimental 
stage — the period during which the people were finding out 
what the industrial revolution had done to them — produced 
such tragic figures as those which composed the Midgets Bat- 
tallion, that army of dwarfs which — until retired for very 
pity — fought for England during the Great War. The men 
who went out from the industrial districts in 19 14 — from 
Liverpool, Manchester, and Glasgow — were mere walking 
wrecks compared with the men you see on the streets there 
now. Five years of exercise in the open air, with good food 
and repaired teeth, have made a difference in the appearance 
of the British man in the street, which even the most casual 
traveler cannot fail to notice. Corrective measures began, it 
is true, half a century ago with the factory acts limiting hours 
and laying down conditions of employment. But the war took 
the matter of health out of the class of philanthropy and made 
it a necessity for national survival. In England, as in every 
other country, the lesson learned during the war is now being 
applied to enable the country to hold its own in economic 
warfare. The efficiency of the labor unit is being maintained 
and increased for the sake of keeping production costs low 
enough to enable the country to compete in the world trade 
market. 

Phases of Conservation and Development 

The conservation and development of the human factor in 
industry seems to have broken out in every department almost 
simultaneously. Beginning in America about 19 17 with the 
Rochester convention of employment managers and the short 
courses in employment management given under the auspices 
of the federal government, with the army tests of Walter Dill 
Scott and his associates, and with the vestibule training 



SELECTION AND EDUCATION OF EMPLOYEES 



397 



schools, where Iowa farmers were made into machinists in a 
few weeks, a multitude of activities, which had previously ex- 
isted only in isolated plants, were applied to industry generally. 
The relation of each to the other can perhaps be best shown 
by a tabulation : 

1. Job analysis — the determination of the qualities each 

variety of work demands from the workman. 

2. Workman analysis : 

(a) Trade tests — consisting of questions and tasks 

which determine whether or not a workman 
is experienced in a trade. 

(b) Psycho-technical tests — consisting of questions 

and tasks designed to determine the work- 
man's physical and mental fitness to perform 
certain work, when properly trained. 

(c) Miscellaneous tests — ranging all the way from 

the first impressions of the interviewer 
through observational analyses, phrenology, 
handwriting assays, and aura divination, to 
soothsaying and fortune-telling. 

3. Training the worker: 

(a) Shop work for apprentices. 

(b) Vestibule training schools — for new employees 

not fully trained for the job. 

(c) Shop laboratories — for determining scientific- 

ally the one best way to do each job under 
existing conditions and for training existing 
employees to perform the work according 
to the method determined. 

4. Educating the worker : 

(a) Education of the child. 

(b) Schools for apprentices. 

(c) Trade schools. 



398 AMERICA VS. EUROPE IN INDUSTRY 

(d) Continuation schools — for the "young person" 

who works part time. 

(e) Night schools — for mature workmen who wish 

to improve their positions. 

(f) Education in citizenship — which includes in- 

struction in hygiene, sanitation, safety, and 
in all branches of knowledge the possession 
of which increases the workman's value to 
the community as a citizen. 

(g) Educational courses for foremen, 
(h) Education in management. 

Selection of Materials and Men 

It is obvious that it is impossible to select goods to fill an 
order until the order is presented. It is also obvious that a 
man who would make out an order without knowing how many 
and what sort of goods were needed could be characterized only 
as a blithering idiot. Under the circumstances it is remarkable 
that the same principles which have been applied to the selec- 
tion of materials for over half a century are just beginning 
to be applied to the selection of labor. In the selection of 
material the steps were : 

1. The preparation of specifications, covering dimensions 

and quality in great detail. 

2. The determination of the quantity required. 

3. Placing an order designed to secure the exact quan- 

tity, size, and quality required. 

4. Inspection and test to determine whether quantity, 

size, and quality coincide with the needs of the pur- 
chaser as specified in the order. 

Of course, this neglect of the human factor has been due 
to that weakness of human nature which makes us avoid the 
difficult task for the easy one. It is easy to write specifications 



SELECTION AND EDUCATION OF EMPLOYEES 



399 



for materials as compared with specifications for men. It is 
easy to compare materials with the specifications, but hard to 
determine whether or not men meet specifications even sup- 
posing them agreed upon. Because the task was hard the boss 
has preferred to intimate that he possessed a mysterious power 
— a sort of black magic — which enabled him to judge men. 
He has rather fancied himself in the role of divinely inspired 
oracle, and in consequence selection until recently has been on 
a basis of "hunch," of likes and dislikes, or upon some qual- 
ity upon an intellectual par with that which leads the monkeys 
in the park to select certain offerings and to reject others. 

The problem of improving the quality of materials received 
the attention of our best brains. Consider the history of the 
development of iron and steel for the past century. On the 
other hand it took the Great War and the threat of world-wide 
Bolshevism really to wake us up to the necessity for improving 
the quality of the minds and bodies of our workmen. 

Job Analysis 

The first step in the selection of labor is the preparation 
of the specification — of the job analysis chart. Figure 74 
shows an excerpt from a typical job analysis chart used in an 
American concern. It is not scientific in the laboratory sense, 
but anyone who has ever made a similar survey of an industry 
knows that it is about 1,000 per cent in advance of the vague 
and nebulous unrecorded standards which exist in the minds 
of various foremen and hiring clerks in the industries of the 
country. Some day we will have scientific standards. Mean- 
time the job analysis shown will at least insure that someone 
has given careful detailed consideration to the type of man 
required for each job and it will insure rates of pay somewhat 
in proportion to the difficulty of the job and to the time re- 
quired to become proficient at it. 

The proof that such a job analysis is a logical development 



400 



AMERICA VS. EUROPE IN INDUSTRY 






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AMERICA VS. EUROPE IN INDUSTRY 



lies in the fact that in a number of cases where the fixing of 
relative rates of pay has been undertaken by committees of 
workmen, just such matters have, after weeks of discussion, 
eventually been given consideration as are listed in the headings 
shown. The class-rating number (column 8, figure i) is not 
set until such matters as the time to learn (column 16), the 
degree of fatigue (column 2j), etc., have been determined. 
Wages are supposed to vary directly with the class rating 
which indicates the desirability of the job. In this particular 
instance women were used, before the war ended, up to the 
third class shown in column 8. The relative desirability of 
inside and outside work (columns 14 and 15) varies with the 
season. A man in charge of a crew would usually be expected 
to speak English, while the men under him might be required 
to understand it only (column 22). The other column headings 
are made clear by the footnotes. How far the man making 
such a survey should go in order to insure that the ratings ex- 
actly describe the job depends upon the circumstances. The- 
oretically it should be accurate to a degree possible only after 
years of experiment in psychological laboratories. Actually 
the data which an intelligent man with an analytical mind 
and the power of accurate observation will collect, are sufficient. 
If these data are checked by the various foremen involved, and 
approved by the plant superintendent, they will prove of so 
great value in fixing wages and in selecting workmen that most 
plants cannot afford to be without them. The scientific job 
analysis is on the way. 1 Meantime there is no reason why we 
shouldn't do what we can with the means at our command. 

Workman Analysis — Trade Tests 

Having decided what sort of men you would like to have, 
the next step is to find out what you can get This brings us 



1 See Henry C. Link's exceedingly able book "Employment Psychology," The Mac- 
millan Company, New York City. 



SELECTION AND EDUCATION OF EMPLOYEES 



403 



to the second step shown by the tabulation — to workman an- 
alysis. The American army trade tests were the great and in- 
disputable proof of the value of such tests. 2 With thousands of 
men, whose claims and desires ranged all the way from that 
of the darky who preferred the artillery because it gave him 
a chance to associate with a mule, to that of the patriotic busi- 
ness man who desired a job as lorry-driver because it would 
get him to the front quicker, it became necessary to establish 
some method by which a man of average intelligence could 
tell a blacksmith from an electrician. This was accomplished 
by giving a man an actual piece of work to perform, designed 
to demonstrate his skill, and by oral and picture test. At the 
time of the signing of the armistice 70 per cent of all soldiers 
who claimed trade ability could be tested. The results of the 
tests of those who claimed to be mechanics showed that 6 per 
cent were experts, 24 per cent were journeymen, 40 per cent 
were apprentices, and 30 per cent were unadulterated liars. 
Such tests show the work in which a man is experienced. 
They are no indication of the work for which he is physically 
or mentally fitted. Neither do they indicate his potential 
ability. 

Psycho-Technical Tests 

The really big question in industry is, however, "Of what 
are you capable?" not "What have you done?" The manu- 
facturer is buying futures, not pasts. A man who has spent 
his twenty years on a farm may become a much better machine 
operator on a new type of machine than a man who has spent 
forty years before a lathe, but neither a trade test nor a letter 
from his previous employer will show it. In view of this 
fact, and of the cost both to employer and to employee of 
teaching men work for which they are not fitted, certain 



2 See Industrial Education Circular No. 4. Bureau of Education, Department of 
Education, Washington, D. C. 



404 



AMERICA VS. EUROPE IN INDUSTRY 



men throughout the world have been endeavoring to eliminate 
this waste from industry by devising some sort of test which 
will show beforehand for what sort of work a man is fitted. 
These tests are described in great detail in Dr. Link's book. 
For instance, a girl who was to be trained for assembly work 
would be given a test "for the perception of odd shapes and 
sizes" — a sort of jig-saw puzzle test. The strength of her 
hands would be tested with a hand-dynamometer, etc. Girls 
who were to do inspecting would be tested for keenness of 
eyesight; for speed and accuracy by means of a card-sorting 
test, a key-tapping test, etc. ; for steadiness and for intelligence 
by means of some of the Wood worth- Wells tests, in which 
certain numbers are crossed out of groups of figures, etc. As 
might be expected, common sense tests of this sort where the 
activities were akin to the activities engaged in when actually 
on the job, resulted in more than half the girls selected by 
test proving acceptable workers when trained. The estab- 
lishment of suitable tests and the proof of each test by record- 
ing the ultimate performance of each operator tested, is a 
stupendous one, as will readily be realized when the complex 
nature of modern industry is considered. The work is being 
carried on in America, in England, and in Germany, and it 
is only a question of time when proved tests will be available 
which will greatly reduce the proportion of round pegs in 
square holes and the consequent industrial waste. 

Miscellaneous Tests 

The miscellaneous tests represent the substitute methods — 
the methods which we have had to use until the scientific tests 
were developed. They represent also the panaceas offered 
by those who have realized the great need of such tests and 
who have not hesitated to rush in with a doubtful remedy. 
Some of these people have meant well and others are on a 
par with the charlatans who offer love-philtres and charms 



SELECTION AND EDUCATION OF EMPLOYEES 405 

against bad luck and disease — merely disreputable quacks 
willing to exploit human weakness for personal gain. 3 

Certain experiments tried upon such charlatans — ranging 
from sending a plaster cast of a Hubbard squash to "have 
its character read" to arranging for certain skilled mechanics 
to be assayed for mechanical skill by the facial structure and 
texture method, with disconcerting results for the expert — 
have convinced all except that great class of whom, P. T. 
Barnum asserted, one is born every minute, that you can't 
tell what is inside a bundle by glancing at the outside of it. 
The dreamer who has permitted his imagination and his desire 
for a panacea for a great industrial waste to get the better 
of his common sense needs the tonic of such statements as 
the following, from Dr. Link's "Employment Psychology" ; 

In the case of large organizations where the process of 
estimating individuals involves very important stakes, the 
observational method is extremely dangerous and inadequate. 

How comparatively easy it is to govern one's appearance 
and to act the part for which one is aspiring. 

What a great change in the shape of a man's head and 
the height of his forehead is made by a hair-cut. 

A man who to the observer looks like a ferocious round- 
headed simian one day may become a mild-featured, sedentary 
long-headed bookkeeper the next — after a hair-cut and a 
shave. 

I have personally known of great injustices and irrepa- 
rable wrongs committed under the name of such pseudo-sci- 
ences. If you would avoid similar experiences keep away 
from the quacks and patronize the regular practitioners — the 
accredited psychologists educated in some of our great uni- 
versities. 4 



3 See "Mythology and Science of Character Analysis," by Professor John Foster 
Adams of the University of Michigan in Scribner's Magazine for May, 1921, and 
"Psychology Goldbricks" in the June number of the same magazine. 

4 See G. M. Whipple, Manual of Mental and Physical Tests; Sherrington's, In- 
tegrative Action of Nervous System; and H. L. Hollingworth, Vocational Psychology. 



4 o6 AMERICA VS. EUROPE IN INDUSTRY 

Training and Education 

The need for the education of the human industrial unit — 
whether it be preparatory, as in the case of the child who will 
eventually enter the factory, or concurrent, as in the case of 
the unskilled workman or the foreman who can be made to 
function more effectively by training, or broadly constructive, 
as in the case of the stockholder or the public, who in the 
end controls the policy of industry — should be evident without 
discussion. The more intelligent each part the more intelli- 
gent is the whole, and the greatest wastes of industry — the 
wastes due to the ignorance of men, of management, and of 
stockholders — can be eliminated only by education. The way 
to make a man industrious, thrifty, and dutiful is to educate 
him to industry, thrift, and responsibility when he is a child. 
The way to make a skilled workman is to teach him the proper 
way to do his work while he is learning his trade. The way 
to prevent a workman from spoiling material is to teach him 
to be more skilful and then make it worth his while to turn 
out only good work. The way to prevent a workman from 
accepting the doctrines from someone with an axe to grind — 
be it Bolshevist, corrupt politician, or demagogue of any sort 
— is to acquaint him with the economic and moral truths 
which have been discovered by the honest men of all ages. 
The way to give the workman the true idea of the ideals 
which actuate a company and of the methods by which these 
ideals may be attained is to educate the foremen — who repre- 
sent the company to the workman — as to what these ideals 
and methods are. And finally — since the responsibility for 
the efficiency and for the survival of industry rests wholly 
upon the shoulders of the management — from the working 
leader of a crew of two to the administrator who shapes the 
course which enables the ship to weather the storm of years — 
the way to insure wise management is to pour the wisdom 
of the ages — from that of the Greek philosophers down to 



SELECTION AND EDUCATION OF EMPLOYEES 407 

the discoveries of today — into the consciousness of those who 
guide the ship of business. The future of industry rests upon 
education — education in regard to principles, methods, com- 
position, and technique. A knowledge of things and of men 
is also necessary, but most important of all is the education 
of the common people to those high ideals which are the 
foundation of moral character and of the happiness that 
endures. 

Selection and Education Abroad 

While the psychologists, the philosophers, and the scientific 
men of both France and Italy have added greatly to the 
knowledge of man, of his reaction to various stimuli, and of 
the laws and principles which motivate him, in so far as I 
was able to learn there has been no systematic industrial appli- 
cation of such analyses either in the form of job analyses 
or of workman analyses. 

In England considerable work has already been done along 
this line. Dr. Link's book is widely read, and in three of 
the more progressive plants tests were in use or were being 
devised. At one plant match-board tests 5 were in use. At 
another, boys applying for work were placed in a special in- 
struction division for a week. Here they were tested out 
in various ways and at the end of the week placed in the 
works department for which they were best fitted, or were 
rejected. 

England — National Institute of Psychology and Physiology 

Considerable very fine experimental work is being done 
at the Cambridge Psychological Laboratory. I spent two 
days there with Dr. C. S. Myers and Professor Bernard 
Muscio who are working out various mental and physical 



"Match-board tests are devised to test quickness, dexterity, and ability to follow 
instructions, the subject being required to move matches about in a sort of cribbage 
board \n various manners. 



4 o8 AMERICA VS. EUROPE IN INDUSTRY 

tests, which should prove of great value to industry. Dr. 
Myers is one of the organizers of the National Institute of 
Psychology and Physiology Applied to Commerce and In- 
dustry, 6 which was organized for ;. 

1. The establishment of well-equipped laboratories for 

research into various occupations to determine — 

(a) Conditions necessary to give optimum output, 

such as elimination of unnecessary move- 
ments, best distribution of periods of rest, 
reduction of monotony, increased interest, 
etc. 

(b) Causes of mental and muscular fatigue and 

methods of reducing the same. 

(c) Tests to establish standards by which workers 

can be selected for the occupations for 
which they are best fitted mentally and 
physically, and parents and after-care com- 
mittees can be advised as to the best voca- 
tion for children. This would eliminate 
much waste at the outset and prevent a great 
amount of discontent which arises when the 
worker finds too late that he has taken up an 
unsuitable occupation. 

(d) Collection and classification of facts estab- 

lished by research. These will be published 
from time to time in such a way as to indi- 
cate their practical value. 

2. The co-ordination and support of similar investiga- 

tions, which may be in progress. 

3. The provision of training- courses and lectures for 

investigators, managers, foremen, and welfare 
workers in the practical application of psychology 
and physiology. 

4. Undertaking investigations at factories, offices, etc., 

in relation to any special problem. 

5. The study of the conditions which tend to the health, 

comfort, and welfare generally of the worker. 



"George H. Miles, D-.Sc, Secretary, 329 High Holborn, London, W. C. 2. 



SELECTION AND EDUCATION OF EMPLOYEES 409 

6. The study of the psychological relations between 
management and labor with special reference to 
securing harmony and co-operation. 

J. Propaganda work among employers and employed, and 
active co-operation with the organizations of both, 
to assist in furthering national unity and prosperity. 

8. Establishment of a library and the publication of 
results to members. 

Germany — The Charlottenburg Psycho-Technical Tests 

Germany is really the home of the psycho-technical test 
which implies the highest type of both job analysis and work- 
man analysis. Nearly every plant I visited had in its edu- 
cational department a section where such tests were given. 
The sort of tests differed at each plant but all followed the 
general idea worked out by Dr. Moede, director of the De- 
partment for Industrial Psychotechnics at the Testing Labora- 
tory for Machine Tools of the Engineering University at 
Charlottenburg. To quote from a description of this labor- 
atory : 

The methods employed for determining the physical fitness 
of individuals are essentially : 

1. Statistics of the operation of a plant. 

2. The system of query sheets. 

3. The picking method. 

4. The systematic examination. 

As practiced at Charlottenburg the test is devised to afford 
parents and tutors a means for advising the youth .with 
regard to the best profession they should take up. Such an 
advice presupposes positive knowledge of the essential re- 
quirements of a vocation or profession and moreover all the 
applicants must be tested under the same, or at least under 
similar circumstances and with the same means. 

An example of the method employed for measuring simul- 
taneously the accuracy of aim of the eye and the hand is to 
take a metal plate containing rectangular holes of various 
width and diameter, and zig-zag lines. This metal plate 



4io 



AMERICA VS. EUROPE IN INDUSTRY 

constitutes one pole of a battery. The pin which the indi- 
vidual to be examined carries in his hand is the opposite pole 
of the battery. If this contact pin touches the wall of the 
metal plate in any place a bell is sounded. The first holes 
are very large; from 6 millimeters diameter they become 
gradually smaller until the hole or the slot is only i-ioth of a 
millimeter larger than the pin. This is a test which a molder 
for instance, must be able to pass satisfactorily; if his hand 
trembles he is not in a position to withdraw the pattern from 
the sand without tearing the mold. Children with hereditary 
diseases or with nervous debility suffer from such nervous 
trembling. 

Other methods of testing consist in picking out certain 
pieces of machinery according to drawings, or the solution 
of technical combination problems. The apprentice is shown 
a drawing which is not very simple, representing, for in- 
stance, an automatically acting float valve. It is explained 
to him that the water enters from below and he is asked what 
will happen ; or else he will be asked on the basis of another 
drawing what will happen with a water wheel if one current 
of water flows upon the vanes from above and another one 
from below. He is to state what determines the direction of 
rotation. Repeatedly very good replies were received stating 
that the direction of rotation and the speed depend upon the 
relation between the forces engaging above and below. 

Serious mistakes which produce a lack of attention and 
grasping powers are often experienced when it is a question 
of picking out objects according to drawings shown to the 
apprentice. If, for instance, the apprentice is shown the 
drawing of a spanner, he will first of all find a belt shifter, 
because this instrument is also long and thickened in parts. 
The result of the psycho-technical examination of the appren- 
tices is inserted upon a protocol. The testimonial, however, 
will also show data, the lack of which has hitherto often been 
called a drawback of the system, namely, the environment and 
domestic circumstances of the boy and also the impression 
which the examiner has gained during the work in the labora- 
tory and by asking the boy questions. 

The methods of examination for adults, as a rule, simply 
adopt the conditions prevailing in practice, transplanted into 



SELECTION AND EDUCATION OF EMPLOYEES 411 

the laboratory in a way to come as near reality as possible, 
since naturally one cannot test any persons under the actual 
conditions prevailing in practice. 

This refers in the first place to the testing of motor-car 
drivers. The basis of these tests is the so-called "reflection 
table" designed by Dr. Moede, in which the lights in the 
street are represented by white incandescent lamps and the 
dangers by red or yellow lamps of various sizes. The capa- 
bility of the individual for grasping the situation is measured 
by means of a clock registering one thousandth of a second. 
This table has been employed in various work shops; it has 
been changed about and improved but in principle it has 
remained. 

The Dresden laboratory for testing locomotive drivers also 
employs Moede's tables as a signaling picture, in a manner 
very similar to the original table suggested by the inventor. 
The table is simply supplemented by gauge glasses, pressure 
gauge, and signaling whistle. The testing equipment of the 
Great Berlin Tramway System is likewise based on this same 
reflection table which has been adapted to the conditions of 
tram service by Mr. Tramm under the management of the 
late Baurat Otto. The experimental station of the tramway 
in Lichtenberg near Berlin is equipped in such a perfect 
manner that everybody having an opportunity should inspect 
this station. It is certain that by the careful selection and 
training afforded by this station the Berlin public is protected 
against numerous dangers to which it would be exposed by a 
less carefully selected operating staff. The method adopted 
in this station is to imitate the actual conditions prevailing 
as closely as possible. The person to be examined is standing 
upon the driver's platform and the examiner is standing in 
front of him. The man operates the controller and brake 
with all accessories in the same manner as on the tram-car. 

For producing a danger to frighten the man, suddenly a 
mighty short circuit flashes in front of him — if necessary 
the platform upon which he stands may be lowered 2 to 23/2 
inches. This is supposed to indicate the car jumping the 
rails. As the examiner has told us, it often happens that 
older people simply run away when the short circuit occurs. 
On the street such a tram-car would continue to run without 



412 



AMERICA VS. EUROPE IN INDUSTRY 



the driver being in charge, and an accident would be almost 
unavoidable. The men are gradually trained to face the 
danger, the device of frightening them by the short circuit 
being repeated at frequent intervals. 

An additional device which has done excellent service in 
the testing of men is the so-called "tremometer." This in- 
strument will in time enable the driver to handle the crank 
of the controller subconsciously, so that he knows instinc- 
tively where the contact points are : for instance, for starting 
the car he must instinctively stop his crank on contact 3, 
and then go further back for braking. In order to learn 
this the man must learn to guide a contact pin in a slot 
without trembling and without touching the sides of the slot. 
Each touch of the sides is a mistake, which is inserted on 
the log sheet. According to the information supplied to us 
. by Mr. Tramm of the Great Berlin Tramway System, over 
a thousand car drivers have been tested in this fashion, and 
no man is put in charge of a car unless he has passed this 
examination. 

The degree of nervousness of the man and his suscepti- 
bility to fright will be tested in a similar manner. Naturally 
a man in charge of a tram-car must not be easily frightened. 

German Factory Tests 

The tests which I encountered in the factories were similar 
to those just described. For instance, in one very large plant 
machinist apprentices were tested for accuracy of eye and 
hand by being asked to : 

1. Indicate by a number the order of size of seven or 

eight holes of very nearly the same size drilled in 
a metal plate. 

2. Arrange in order of weight half a dozen 2-inch cubes 

of different weights. 

3. Arrange by sense of touch, in order of fineness of 

corrugation, a number of steel plates, while blind- 
folded. 

4. Strike exactly on a line drawn across a lead plate, 

using a small pointed hammer, at the speed indi- 
cated by the instructor. 



SELECTION AND EDUCATION OF EMPLOYEES 413 



Einstellung and l/ertei/ung 
aufdie Fabrikations-Abteilungen 



vom 



Persona/buro 
MP 



J if Fabrik fur 
ahnmaterial 



Gf -Gross- 

Maschinen ■ 

Fabrik 



Hf Fabrik fur 

Hochspannungs- 

Material 



Kf Klein - 

Moioren ■ 

Fabrik 



Wf Widerstands 
fabrik 




Cjesamt -Ausbildung in den 
Fabrikations-Abbei/ungen 115 Wochen 



Wochen 



Fhrsona/buro MP 
weitere Yertei/ung aufdie 
Yerwaltungs-Abteilungen 




Wochen 



Figure 75. Diagram of the Apprentice Courses at the A. E. G. in Berlin 



4 I4 AMERICA VS. EUROPE IN INDUSTRY 

5. Look at a simple shape, such as a vase, and then draw 

an outline from memory. 

6. Draw an exact circle free hand, and complete certain 

drawings of simple figures. 

7. Fit together various puzzle shapes. 

8. Make a simple tool from a drawing. 

After successfully passing such a test as this and answer- 
ing a series of test questions there would be little doubt that 
a boy would spoil a minimum of material and would shut 
down a machine to gauge only when absolutely necessary. 
Tests of similar nature I found in such widely differing plants 
as a locomotive plant, a machine tool plant, and a plant manu- 
facturing electrical motors. In no case did there seem to be 
any doubt as to their efficiency either on the part of plant 
directors or of the teachers in charge of the factory apprentice 
courses. 

Schools for Apprentices 

Apprenticeship schools are much more common abroad 
than in America. In the A. E. G. two courses are given. — one 
for the factory or manufacturing departments, and the other 
for the administrative departments. Each course is under the 
supervision of an employment bureau (Personalburo). One 
bureau (see upper part of Figure 75) directs all the work car- 
ried on in the five factories — the factory for railways material, 
the large machine factory, the factory for high tension material, 
the small motors factory, and the resistance factory. Classes 
are conducted simultaneously in (Gleichzeitige Ausbildung) in 
15 subjects, and constitute a 115 weeks' course. The subject 
to which the most time is given — 19 weeks — is stores admin- 
istration. (The number of weeks devoted to each subject 
are shown at the bottom of each section of the diagram.) 
Thirteen weeks each are given to figuring pay-roll, material 
orders, work orders, and costing. The work of shop clerks 



SELECTION AND EDUCATION OF EMPLOYEES 415 

and that of checking shipment dates is explained in two 
courses of eight weeks each. Six weeks are devoted to gen- 
eral files. Four weeks' classes are given in the preparation 
of estimates, pay-roll calculations, testing organization, admin- 
istration of technical bureaus, and drafting. Tool and steel 
bearings, and shop files are covered in classes of two weeks. 

The course for the administrative departments (see lower 
part of Figure 75) is only a trifle shorter than that for the 
factory departments, 94 weeks being required for the former 
as compared with 115 weeks for the latter. The most im- 
portant subjects taught are purchasing and bookkeeping, to 
which 17 and 18 weeks are devoted respectively. Shipping 
stockroom procedure and workmen's affairs receive ten and 
eight weeks respectively. Six weeks are devoted to checking 
bills, and four weeks to each of the following subjects — tool- 
making, tool commerce, checking pay-roll, and checking office 
work. Practice and procedure in connection with the employ- 
ment office, the building office, millwrights, the patent office, 
blue-prints, bookkeeping, in and out letters, insurance, check- 
ing hours of work, returns, the engine and boiler house, the 
chemical laboratory, and permanent records each receive two 
weeks. One-week classes are conducted in organization, 
duties of the cashier, and of the law bureau. 

In Germany the apprentice school is one of the show places 
in every factory. The school rooms are large, light and airy 
(see Figure 76) and as you enter you notice first the absorbed 
interest of the boys in the problem under demonstration and 
then the lightning speed with which all rise to their feet and 
stand stiffly to attention as long as visitors are present or 
until they are requested to resume the lesson. Instead of the 
listlessness, the sniggering at visitors, and the lack of serious 
interest, which we regard as the privilege of childhood in 
America, we find in Germany a discipline which accounts for 
life and work being regarded as serious matters. 



416 



AMERICA VS. EUROPE IN INDUSTRY 




SELECTION AND EDUCATION OF EMPLOYEES 417 

The system in Germany is to decide what is good for the 
state and then educate the child accordingly. Contrast this 
with some of our late ''maintenance of the child's freedom 
of choice" fads under which our children are encouraged to 
be as lawless as possible in school in order to ''develop their 
powers of self-expression" and are then parked at the movies 
where for the rest of the day they receive their real education 
from sex plays. Just where the worship of inclination and 
the disregard of duty — that disagreeable, but healthful old 
deity which the Pilgrims brought to America but which we 
relegated to the attic about twenty-five years ago — will lead 
us, remains to< be seen. 

Each German factory is also equipped with workrooms 
for apprentices, partitioned off from the general factory (see 
Figure Jj). In one plant I visited there were 1,200 such 
apprentices. They begin work at about 14 years of age and 
for four years spend one day a week in the plant schoolroom 
studying the theory of their work and the other five days in 
the special apprentice workrooms, receiving small wages. The 
more promising are given special foremanship training. 

In another plant there were 300 apprentices working on 
practically the same plan. In another there were 525, work- 
ing 1 1 hours a week in the schoolroom and the balance of the 
time on the two or three floors of one of the buildings set 
aside for apprentices. They received .45 marks per hour the 
first year, .60 per hour the second, .80 per hour the third, 
and 1 mark per hour the fourth. Contrast this German boy, 
after four years' strenuous work under rigid discipline, taking 
his daily pittance proudly and dutifully home to his parents 
with our own typical youth, the senior at high school, begging 
a ride home in somebody's auto and hitting his father for a 
couple of dollars to give the girls a good time. Which boy 
will render the industries of his country more efficient when 
he gets a regular job? 



4i8 



AMERICA VS. EUROPE IN INDUSTRY 




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SELECTION AND EDUCATION OF EMPLOYEES 



419 



In the plant just mentioned about twenty apprentices of spe- 
cial ability were taking special studies. All apprentices take the 
same course for the first two years after which those who 
display marked ability are given a special course. A training 
hall for foremen had just been fitted up for use in demon- 
strating, by means of illustrated lectures, new types of manu- 
factured products, and the uses to which they would be put. 
Workmen were allowed to attend these lectures. 

Result of German Industrial Education 

And what is the result of German industrial education? 
Only recently I spent a couple of hours with an engineer who 
had worked until he was nearly thirty in one of the great 
German plants. He told me of a Swiss who was to arrive 
at the Potsdam Bahnhof with a special switch oil at 8 130 in 
the morning. At 8:31 he himself met him with a taxicab 
in which were two men to carry the oil. At 8 150 they arrived 
at the plant. The plant superintendent had the container 
ready and the wiring complete. At 9 o'clock the superin- 
tendent shouted "Achtung!" and all stood stiffly to attention 
while the current was thrown on. At 9:15 the sample was 
in the laboratory and at 10 o'clock — one and one-half hours 
after the train arrived — the complete report was in the hands 
of the Direktion! The vice-president of one of our own most 
efficient plants of this type heard of this and told my friend 
that the same test would have required three days in his plant. 
My friend remarked, however, to me, "Yes! And I, who 
have worked in both plants, know that the same test, which 
required an hour and a half in Berlin, would have required 
three weeks in America." 

"Also," he said, "I have seen workmen in the Berlin fac- 
tories—workmen, not foremen — figuring their wages by means 
of calculus ! They are educated for what they are to be from 
the mother's breast, and whatever they are, you can be sure 



4 20 AMERICA VS. EUROPE IN INDUSTRY 

they are competent to fill the position which they hold. They 
are trained for it; they are trained to do what they are told — 
and they do it. It produces a wonderful industrial efficiency, 
though it has drawbacks in other ways, as you know." 

The English Education Act of 1918 

At the other extreme there is the English system with the 
Labour Party getting out a primer of instructions to the labor 
unionists in which they say, under "Points to Be Watched," — 
in connection with the 19 18 Education Act: 

See that your Local Education Authority does not recog- 
nize "works schools" maintained by private employers as 
giving "suitable and efficient" continued education within 
the meaning of the act. 

The primary object of the new continuation schools should 
not be to impart specialized industrial or commercial training, 
but to give boys and girls a good general education, to develop 
their physique and character, and to prepare them for intel- 
ligent citizenship. See, therefore, that your Local Education 
Authority resists the pressure of industrial interests to use 
the schools to train the workers for industry. 

There is a reason for Charles Schwab's statement in a 
newspaper article, April 20, 1921, that "Germany can put a 
ton of steel in England at a price $20 a ton cheaper than 
England can make it, and is selling pneumatic tools in Detroit 
where formerly we shipped such machinery to Germany and 
sold it cheaper than she could make it. The difference is 
solely a matter of labor cost." The question as to which 
policy takes a country further in the long run will be worked 
out in the next fifty years. 

In England, under the 19 18 Education Act (the Fisher 
Act which went into effect in January, 1921) all adolescents 
between the ages of 14 and 16 are required to attend a con- 
tinuation school, for a period of 8 hours per week during 
working hours. Later this will be extended to the age of 18. 



SELECTION AND EDUCATION OF EMPLOYEES 421 

The Cadbury Brothers' Plan 

Several companies started such schools five or six years 
ago. Cadbury Brothers insisted upon all workers under 16 
attending a night school and instituted some day classes as 
early as 1906. At present this company's plan, operated under 
the direction of the local education committee, provides for 
two compulsory half-days at the continuation school for all 
boys and girls from 14 to 16, one compulsory and one volun- 
tary half-day for those from 16 to 18, and special courses for 
office youths until 19 and apprentices until 21. The boys are 
taught English, physical training, arithmetic, history, citizen- 
ship, geography, science, wood- and metal-working art, town- 
planning, economics, etc. Girls are taught English, physical 
training, arithmetic, laws of health, sick nursing, infant care, 
housewifery, cookery, dressmaking, and psychology. (Sev- 
enty-five per cent of the girls employed are married in their 
twenties.) 

Under the apprenticeship scheme the course is extended 
for those working at trades, and apprentices are trained also 
at the Birmingham educational institutions. Scholarships at 
the universities are granted in special cases. In addition 
there is a Bourneville works school where such subjects as 
box-making, biscuit-making, confectionery, office routine, etc., 
are taught. Foremen are given special training for 12 months 
after appointment in such matters as planning, etc. This 
same company has a sort of vestibule school where boys and 
girls are given special introductory training for a week, during 
which they are shown moving pictures of the gathering of 
the raw material, and are themselves studied carefully so that 
they may be placed most advantageously in the plant. 

Other Training Schools 

It is obviously impossible to consider the various types of 
continuation and apprenticeship schools in detail. We have 



422 AMERICA VS. EUROPE IN INDUSTRY 

given in Appendix C the prospectus of a particularly large 
and well-run school. We would advise those who wish to 
go further into the matter to consult the bibliography in Ap- 
pendix B, studying particularly the scheme of Lever Brothers, 
which is also under control of a joint committee representing 
employer and employee, and the analysis of education for 
apprentices given in Mr. Mensforth's paper, read before the 
Manchester Association of Engineers. 

One of the most interesting training schools is one located 
in a large plant near Cambridge. For the factory employee 
there is a training section where unskilled workers are taught 
their trade, working the regular factory hours and being paid 
from the beginning. For the office employees various classes 
are conducted, varying all the way from elementary classes 
supplementing the school education to those for correspondents, 
salesmen, and managers. Employees who develop an aptitude 
for accounting are given an arithmetic and bookkeeping course 
which includes also law and business procedure. The corre- 
spondents are taught shorthand, English, and certain techni- 
calities of the business. A good deal of time-study work has 
been done in connection with the office work in this concern 
and a special motion-eliminating desk has been worked out, 
which correspondents are taught to use. One of the inter- 
esting features of the salesmen's congresses held by the com- 
pany is a large disc with an arrow, which is placed on the 
stage behind the men giving sales demonstrations. The arrow 
is turned to indicate the various stages of the sale, such as 
"the approach," "awakening interest," "closing the sale," etc. 
This permits spontaniety on the part of the salesman demon- 
strating, but impresses the analysis of the various stages of 
the sale upon the members of the audience. The company 
also gets out most complete printed sales talks with ways of 
meeting every possible reason for not buying which the cus- 
tomers might advance. In addition there are various recrea- 



SELECTION AND EDUCATION OF EMPLOYEES 



423 



tional classes in elocution, drama, singing, embroidery, etc., 
governed by committees of employees. 

At another plant near Manchester I found a well-organized 
vestibule school for training new employees. At another 
plant in the same district sixteen foremen had just returned 
from a week's study of labor economics at the university of 
Oxford. At still another plant — a unit in an enormous con- 
solidation — a special feature was being made of plant visits 
for foremen, who were encouraged to visit the more modern 
plants of the company and to discuss their problems with 
those in charge. 

Debating Societies 

One of the most interesting educational developments in 
England is the debating society for employers and employees. 
The fundamental value of such organizations, which are run 
under various names, lies in their permitting the owners and 
the workmen to come together and get acquainted and to 
thresh out, in generalities, questions, which if discussed in 
terms of conditions at a single plant would result in acri- 
monious accusation on both sides. Some of these societies 
are formed as research societies, others for philanthropic or 
social purposes, but the results in all cases are the meetings 
of both sides to the labor controversy on neutral ground, and 
the discussion of subjects of interest to both with a view to 
mutual education and understanding, leading to harmony and 
industrial progress. The Garton Foundation and the. Man- 
chester Engineering Council are typical examples. The latter 
consists of workmen, trade union officials, employers, and 
educators, and the governing boards are made up impartially, 
containing both radical labor leaders and owners of plants. 
It is much harder to hate a man you meet personally twice 
a month for the discussion of subjects of mutual interest than 
it is when your only knowledge of him is gained from a line 



424 AMERICA VS. EUROPE IN INDUSTRY 

in the newspaper which says he has just gone to Palm Beach — 
or that he has led a howling mob in an attack on the works. 
America has a lesson to learn in this respect from England. 

Education of Managers 

The education of managers is carried on in university 
courses — the Manchester School of Technology has a course 
in industrial engineering — and in the various engineering so- 
ciety meetings which are addressed by the leading industrial 
figures of England where such subjects as scientific manage- 
ment, educational and safety methods, and like matters are 
discussed and debated in great detail. F. M. Lawson states 
in his book on industrial control : 

The captain of a ship must possess a master's certificate 
which in itself embraces ability, conduct, and fitness; but 
to be a director of a business no such qualifications are de- 
manded. At the same time qualifications for directorship 
of any business should be demanded, because life may be 
lost as easily by inefficient direction in a factory as by ineffi- 
cient direction from a captain. 

The British government's publication, "The Future," cir- 
culated late in 19 19, states: 

I should know for certain that there was a good time 
coming for the workers if I could learn of men striking 
because their "boss" was a poor hand at bossing ! Workers 
simply cannot afford to have inefficient employers. 

Messrs. Fleming and Pearce in their series of articles 

on "The New Management," state: 

It follows that a most important factor in the new manage- 
ment will be education both for juveniles and adults, which 
will be afforded during industrial life. This education will 
provide a basis for understanding of the principles on which 
industry rests and of its economic structure. It will reveal 
many features which will be new to the average worker and 
will explain many points from which false conclusions are 
now drawn. It will teach that experience and understanding 



SELECTION AND EDUCATION OF EMPLOYEES 425 

are necessary in responsible control of industry. This will 
result in the removal of suspicion and mistrust, which is 
still a fruitful cause of friction in industry, and will facilitate 
the establishment of cooperation between all grades of 
workers. Workers must be taught the elements of economics 
so that they can see the fallacies and exaggerations of 
partisan economic propaganda. 








The workman who strikes paralyzes 
production and injures his country. 



The workman who strikes injures himself. 



Figure 7S>. French Educational Posters Showing the Effect of Strikes 

Upon the Workman 



French Apprenticeship Schools 

France is rapidly developing commercial schools. These 
vary all the way from the Ecole Superieure Pratique de Com- 
merce et d'Industrie, founded in 1828, to the Ecole Commer- 
ciale des Jeunes Filles, founded in 1916. In the former young- 
sters from twelve upward are taught such subjects as French, 
hotel management — with field work in Paris hotels — banking 
and business administration. 



426 AMERICA VS. EUROPE IN INDUSTRY 

Apprenticeship schools of a very fine order exist in the 
larger and more modern French industries. One such admits 
boys and girls at from 9 to 12 years of age. At 13 they are 
given an examination for high school. Those who fail are 
given another year at the apprentice school and then try for 
high school again. If they fail they go to a second apprentice 
school, which fits them for the more ordinary sorts of work 
about the plant. Those at the high school are given training 
for clerical and similar positions. Those showing special 
ability in the high school are sent to the technical universities 
to be trained as engineers and department heads. Girls are 
given special courses in such studies as domestic economy. 

Education in the methods of scientific management has 
for several years formed part of the training of the French 
government engineers. The students are not only given lec- 
tures by competent industrial engineers — men like Henri le 
Chatelier and Charles de Freminville — but spend their vaca- 
tions at St. Nazaire, Le Creusot, and at other plants where 
scientific management methods are installed. Lectures on the 
subject are given at the Sorbonne — in fact I discussed a good 
many phases of the work with an American major who was 
attending such a course and found that it was being taught 
in much the same way as at our own more progressive uni- 
versities. 

Industrial Education in Italy 

Some of the technical and commercial schools in Italy are 
very old — for example, the Scuola di Incoraggiamento Arti e 
Mestieri in Milan, which gives courses in spinning, weaving, 
and applied mechanics, was founded in 1844. The Regia 
Scuola di Tessitura e Tintoria della Provincia di Terra di 
Lavoro in Arpino makes a specialty of training foremen. 
Creches and primary schools for the children of workmen 
are usually found in the more progressive factories. The 



SELECTION AND EDUCATION OF EMPLOYEES 427 

Pirelli educational department is located in a beautiful old 
palace which stands close to one of their Milan plants and 
contains a modern library. The Giovanni Rossi plant is espe- 
cially well provided with such schools. 

The Future of National Industry 

The American army intelligence tests showed that of 
1,700,000 men tested, 4^ per cent received an A rating, 9 per 
cent a B rating, and 16^2 per cent aC-f rating — 30 per cent in 
the first three grades selected from the flower of the country. 
What would be the improvement in American industrial effi- 
ciency if two-thirds of our men came in the first three grades 
of intelligence — were trained to be experienced workmen and 
possessed physiques and moral characters of sufficient strength 
to enable them to realize continually upon their intelligence 
and training ? The future of national industry and, since each 
nation has become industrial, the future of civilization rests 
upon the steps which our industrial leaders take to educate 
the community in these four things — common sense intelli- 
gence, technique in industry, physical culture, and moral 
strength. 



CHAPTER XVII 

SHOP GOVERNMENT AND PROFIT-SHARING 

Democratic Control of Industry 

It has been said that the nineteenth century marked the 
struggle of the common man for recognition in the industry, 
while the twentieth century will mark his struggle for the 
control of industry. Events of the past five years seem to 
point to the correctness of this conclusion. As the common 
man has become better educated and as means of communi- 
cation — the press, the telegraph, and transportation — have 
brought towns and villages 10,000 miles apart as close together 
mentally as were the opposite suburbs of Paris at the time of 
the French Revolution, the common man has been basing his 
conclusions upon facts, to a much greater extent than was 
possible when he knew only what those in control thought best 
to tell him. Such remnants of absolute monarchies as out- 
lived the nineteenth century were cleaned up in the World War. 
The logical result of the democratic form of government, 
which rests upon complete enfranchisement — one vote to one 
adult — is control in industry as well as in government. 

Intelligence vs. Numbers 

The battle of the ages has been that of the "ins" against 
the "outs," of the "haves" against the "have nots." Victory 
is a matter of intelligence, organization, and numbers. When 
a victory is won by sheer weight of numbers — without intelli- 
gence or without organization — we have the chaos of Russia 
with nothing left for anybody. Where intelligence has pre- 
vailed the advance of the masses has been by peaceable and 
legal means — the laws being altered to suit the will of the 

428 



SHOP GOVERNMENT AND PROFIT-SHARING 



429 



majority as the majority has been educated to obtain greater 
benefits by means which will not wreck the existing civiliza- 
tion. Just now we are suffering a reaction from a too rapid 
advance. Russia went on the rocks. Italy nearly went on 
the rocks, and the mutinous sailors in other ships have turned 
to their captains for help until they have themselves learned 
more about navigation. 1 

Wise captains of industry have realized for some time the 
trend of affairs. They have been making themselves solid 
with their crews. The activities which they have utilized have 
assumed several forms. Welfare work was the first form of 
conciliation. This was followed by profit-sharing. The 
latest phase is the works committee or workman's representa- 
tion plan. Meantime the old guard of the besieging army — 
organized labor — has stood on its hind legs and howled in 
derision as more and more valuable possessions have been 
thrown over the battlements to the beleaguers in the hope that 
they will go away satisfied. The battle has waxed and waned 
— sometimes with the advantage to the intelligence and organ- 
ization of the "haves" and again to the numbers of the "have 
nots." As the "have nots" have increased in intelligence their 
gains have been greater and more permanent. They have 
learned to view the situation more calmly — to realize that evo- 
lution by education will net them more in the end than revo- 
lution by force. They have learned to respect the abilities 
of the management and to recognize the part which capital, 
credit, and finance play in modern industry. Meantime em- 
ployers everywhere have also been learning something. 

Profit-Sharing — Appeals and Operation 

To some employers the fact that union labor disapproves 
of profit-sharing is sufficient recommendation. To others, 



1 H. G. Wells, "Outline of History," The Macmillan Co., New York, should be read 
by every voter in every country. 



430 AMERICA VS. EUROPE IN INDUSTRY 

the appeal of the plan is purely altruistic. To the great ma- 
jority, however, who have considered the matter at all, it seems 
to offer a solution of the growing social unrest through making 
the interest of the employee and employer identical. It is 
on this ground that the subject has lately created considerable 
interest among far-seeing employers, who realize that now 
that the working man has begun to capitalize his power 
through the efficient use of his vote, the labor question will 
more and more dominate the industrial situation. 

Failures in the successful operation of profit-sharing plans 
seem for the most part to have been due either to an imperfect 
understanding on the part of the employer of the laboring 
man's viewpoint and psychology, or — where an honest effort 
has been made to reach this and to deal with the problem with 
thoroughness — to a tendency to lump human nature and to 
make too little allowance for its behavior under unforeseen 
circumstances. 

Spread of Education and Radicalism 

Too many employers regard their employees as dependents 
who ought to be glad of any crumbs which may be thrown 
to them. Such employers make no allowance for the fact 
that education has become general, and that a vast literature, 
telling the working man that what he would like to believe 
is true, has been prepared for him by those who have an axe 
to grind as well as by those who have his welfare honestly 
at heart. The more radical of labor's advisers, from their 
soap boxes on street corners, have been painting terrible pic- 
tures of the greed of the capitalistic class, and the reading- 
rooms of our libraries are filled with gentlemen with flowing 
ties who earnestly scan history to discover the base motives 
of former malefactors of great wealth. The average em- 
ployer — decent citizen, father of a family, subscriber to char- 
ity, and supporter of the church — would be horrified if he 



SHOP GOVERNMENT AND PROFIT-SHARING 



431 



knew in what colors he was painted by these gentlemen of 
the flannel shirt and slouch hat, and how many of his work- 
men listen to these advisers and read their pamphlets. 

Human nature likes to be told it has been wronged. It 
is so much more palatable to believe that some brute is with- 
holding from you your rights, than it is to be told you are 
lazy and improvident. Most of us have to have our thinking 
done for us ; and what the village minister did for us sixty 
years ago, our newspapers, our pamphleteers, and our soap- 
box orators are doing for us now. The working man likes 
to be told that presently the boss will walk and that he will 
ride. Little by little, more and more radical doctrines have 
been preached until certain branches of organized labor state 
frankly that their goal is confiscation of the factories which 
they feel belong to them. Under such conditions, the spec- 
tacle of our pursy little capitalist offering a present of a few 
dollars at Christmas and calling it profit-sharing is as absurd 
as that of an early Christian in the arena attempting to placate 
a ravening lion with a caramel. 

All sorts of schemes have been devised to quiet the mur- 
muring lion — from Colonel Weatherby's "Give 'em the grape, 
by Jove, that's what the beggars will understand," to com- 
munistic experiments which usually ended in the 10 per cent 
constitutionally energetic finally refusing to do the work for 
those who insisted on lying in bed and meditating on the 
millennium. 

The Rights Implied by Profit-Sharing 

Gifts at Christmas and other dispensations to dependents 
are commendable; they display in many cases admirable gen- 
erosity and reflect great credit on the giver. In history, many 
beneficent despotisms have contributed greatly to the progress 
of the race, and those living under the despot have been pros- 
perous, happy, and well treated. But profit-sharing implies 



432 AMERICA VS. EUROPE IN INDUSTRY 

partnership — a community of interest founded upon certain 
rights possessed by each partner, by capital and by labor. It 
is the discussion of these rights which causes the trouble. 

Take a hypothetical case for instance. I inherit $100,000 
which I invest in a business of which you are the manager. 
I pay you $5,000 a year, and you hire 100 men at wages 
aggregating $100,000 a year. My capital is my $100,000, 
which I could invest in mortgages or in bonds with perfect 
security and draw 5 per cent with absolute regularity. Your 
capital is your ability and experience. As this earns you 
$5,000 a year, your capital may be said to be also $100,000. 
The employees, each earning $1,000 a year, may be assumed 
to possess in their strength and ability $20,000 "capital" each. 
Suppose we decide to share all profits on that basis after we 
have each drawn our 5 per cent on our "capital." That 
sounds logical, doesn't it? The first year the business earns 
profits of $15,000, which leaves $10,000 to be "shared." We 
split this in proportion to our "capital." Labor draws $9,090, 
you as manager draw $455, and capital represented by me — 
draws $455. 

Can't you imagine my howl when asked to be content with 
a beggarly 4}^ per cent of the year's surplus profits, %o 
per cent on my inheritance — my arguments about "business 
risks," "the reward due enterprise," etc., etc., the manager's 
and the employee's retorts about "continuous employment 
risks," and the "reward due their efficiency and endeavor." 
It would be only a step further to an acrid discussion of my 
right to spend my days on the golf links in idleness, while 
you and your men sweat in a dusty and noisy factory; and 
before we got through we would have split in a row over 
questions of "rights of inheritance" and "property held only 
on suffrance." Very likely you would end with our friends 
of the extreme left — you and your laborers wouldn't be con- 
tent until I sweat in the factory and you played golf. 



SHOP GOVERNMENT AND PROFIT-SHARING 



433 



And yet the greater number of profit-sharing schemes pro- 
pose to content the employee with a "percentage of his wages 
equal to the dividend earned on the capital" — interest on in- 
terest, instead of interest on capital. 

The employee regards fairness of this sort in much the 
same light as would the lion if the early Christian had said, 
"Here, we are partners, let us split this caramel and be satis- 
fied." As a result, when the would-be divider of profits has 
clambered up the barricade and taken refuge behind the safe- 
guards of law and order, Mr. Lion begins to plan alterations 
in the design of the arena and in the rules under which the 
guards operate. In other words, he goes to the legislature 
with his troubles. 

The trouble is that profit-sharing proposals bring up a lot 
of questions for discussion whose answers we do not yet know 
— questions which will require generations of thinkers and 
endless experiment to settle. Like the Irishman, we are all 
prone to believe in an equal distribution of wealth up to the 
point where it necessitates the partition of our pet pig — then 
we disagree violently. Under the circumstances, it is a ques- 
tion if frank largesse — a shower of gold from the king at 
Christmas — hasn't quite as beneficial effect in the long run 
upon both capital and labor as an elaborate system which 
awakens the suspicion of the laboring man and raises the 
question of what is fair between those who have and those 
who have not. 

History of Profit-Sharing Schemes 

Attempts at devising a successful system of profit-sharing, 
which is usually defined as "an agreement between an em- 
ployer and his work people under which the latter receive, 
in addition to their wages a share, fixed beforehand, in the 
profits," began in 1838. Of 380 such schemes, employing 
243,000 men, which have been put into operation in England, 



434 



AMERICA VS. EUROPE IN INDUSTRY 



since that time, 182 still survive. Of the 52 per cent which 
failed, 51 per cent failed because of apathy of employees and 
consequent dissatisfaction of employers with the results. 
Twenty-seven per cent failed because of low profits, 14 per 
cent because of changes in or transfer of the business, and 
13 per cent for miscellaneous reasons. 

A recent survey of profit-sharing schemes in America de- 
scribes some 42 plans which are in more or less successful 
operation. In addition, 45 stock ownership plans, some of 
which include profit-sharing features, are given, and some 
130 special distribution or gratuity plans. Thirty-nine plans 
which have been abandoned are also described. An analysis 
of these last shows that 10 were abandoned on account of labor 
troubles and strikes, 7 because the employers considered them 
unsatisfactory or unfair or had decided that some other plan 
would be better. Five were given up because of failure under 
diminution of profits, 4 on account of lack of appreciation on 
the part of employees, 2 because the business changed hands or 
was discontinued, and 1 because the employees sold out their 
stock on a war market. The reason for 8 abandonments was 
not stated. 

Opinions of Employers 

Opinions of a few employers are enthusiastic. A number 
complain of the difficulty of gauging results and the failure 
of the workmen to respond, but feel on the whole that their 
plans have proved successful. Some of the advantages cited 
are that more regular attendance is insured, the company is 
enabled to keep employees during the rush season, a better 
spirit is created among the workmen, and the profits of the 
business, loyalty, and co-operation, and so forth are increased. 

Various objections made by employers to profit-sharing 
plans include the criticisms that employees often fail to grasp 
the significance of such plans, that they become dissatisfied 



SHOP GOVERNMENT AND PROFIT-SHARING 



435 



when the profits are small, that they spend anticipated bonuses 
in advance and become extravagant, and that they sell stock 
to outsiders. In one instance the employees demanded a voice 
in the conduct of the company's affairs. 

Many of the American plans are so new that their creators 
are still in the first flush of pride at their creation. For this 
reason and because their relatively short period of existence 
has prevented thorough tests, the data in regard to failures 
and such analytical criticisms as are obtainable really indicate 
greater experience and deeper insight into the difficulties of 
the problem than enthusiastic letters in regard to schemes just 
installed. 

Fundamental Difficulties 

It was the writer's privilege a few years ago to study the 
operation of a profit-sharing plan over a period of several 
years, and to have during that period the confidence of the 
firm as well as that of the employees. It was a most illumin- 
ating experience. For the benefit of those who wish to give 
further consideration to the causes of failures we have included 
an account of it in Appendix E. 

Determining Shares. This failure illustrates most of the 
faults which are fundamental with profit-sharing under the 
accepted definition. We have the awakening into conscious- 
ness of the problems of modern society — what is labor's share 
and what is capital's share? What are the rights of property 
and of inheritance? "The company says it wants to be fair. 
Does it? Or is capital simply at its old tricks again — trying 
to put one over on the laboring man." Suspicion is born. 
Efforts on the part of the management to explain involve the 
statement of certain facts in regard to the necessity, of certain 
policies. Elegantly dressed salesmen traveling in Pullmans, 
stopping at palatial hotels, and motoring with prospective cus- 
tomers, look like loafers to the working foreman who arises 



436 AMERICA VS. EUROPE IN INDUSTRY 

at 5 130, wears overalls, and walks to save carfare. How are 
you going to make him see that a salesman is working ten 
times as hard as he is himself, and is entitled to ten times the 
salary, when the activity is all going on inside the salesman's 
head? How are you to make him see also that what a fore- 
man may regard as luxury is such an old story to the salesman 
that it bores him to death — besides giving him indigestion? 

Explaining Business Policies. Business policy in a large 
corporation has become such an intricate affair of late years 
that the biggest men in the company can hardly understand 
it themselves. How are they going to explain to a minor 
executive exactly why they favored expansion at one time 
and retrenchment at another. Even when their reasons can be 
expressed, there is a large chance that the step will be untimely. 
Who allowed for Armageddon on July i, 1914? The writer 
sailed from Montreal on the twenty-fifth, with Villa in Mexico 
the biggest disturber of peace on the horizon, and ten days 
later landed at Liverpool with the world at war. Business 
men understand this element in affairs, which formerly caused 
commercial activities to be classed as "ventures." But how 
are you going to explain to a workman that — "you are very 
sorry — you know he worked 25 per cent harder than anyone 
else and that he did much better work than ever before — but 
unfortunately a rise in the cost of rhodium, caused by cer- 
tain activities of the tribes in the Ural Mountains, had made 
it necessary to change your process of hardening steel, and 
therefore sales had fallen off to such an extent that you 
wouldn't be able to reward him this year, etc., etc." ? Can you 
convince him that he must excel his performance next year, 
especially when he was counting on that cash to lift the mort- 
gage on his house or had already spent it for a piano ? 

Time of Distribution. Even if the workman can be made 
to believe that the amount set aside for him is his share of the 
profits, there is the dilemma as to whether to vitiate such spur 



SHOP GOVERNMENT AND PROFIT-SHARING 



437 



as this to efficiency, to loyalty, and to ingenuity, by withholding 
his share until such time as habits of saving shall have had time 
to form, or to pay in cash and have him "blow it" or discount it 
by going into debt. Even if you pay in cash, payments are 
seldom made until the annual balance sheet is prepared, and 
it is a long time from the first lazy days of spring until 
December when "the ghost walks." Constituted as we are, 
the immediate and near pleasure is usually stronger in its appeal 
than the remote and uncertain reward of the future. Firms 
who have tried even the semiannual payment plan have given 
it up in disgust because the reward was so remote from the 
effort that cause and effect were invisible to the workman. 

Indiscriminate Distribution. The worst element of the 
whole thing is the comparatively indiscriminate distribution of 
the reward. Even where an effort is made to share only with 
a carefully selected and deserving few, there is always the case 
of the man who slacks. As soon as Jackson sees Brown loafing, 
he is sore. He may at first reason with his constitutionally 
tired comrade, but sooner or later Jackson concludes that he 
isn't going to kill himself working while Brown enjoys himself 
and later pulls down just as much as he does. He therefore 
eases up a bit himself, and it isn't very long before the race 
is not to see who can do the most work but rather to see who 
can do the least work and get away with it. In other words, 
conditions were just where they were when profit-sharing was 
introduced. This is also the chief difficulty with the 
gratuity plan. There is no heartburn worse than that of see- 
ing a man you don't like get just as much as you do when he 
doesn't deserve it. A continued repetition of such situations 
not only raises doubt of the firm's judgment in the mind of 
the conscientious worker, but is a positive incentive to dis- 
loyalty. 

Demand for Share in Management. Several instances 
have been cited where an opportunity to share in the profits 



438 AMERICA VS. EUROPE IN INDUSTRY 

aroused among the employees such an interest in the company's 
affairs that they felt they should have a share in the manage- 
ment and in the determination of policy. That is the logical 
sequence of events in the successfully launched scheme. A 
taste of the profits — if, in the mind of the worker, it is con- 
nected with his activities at all — induces extra effort on his 
part. For this he expects, quite naturally, to be rewarded. 
If his reward is not commensurate with his effort, he begins 
to investigate. The company must then choose between the 
dangers of awakening his suspicion by refusing to open its 
books to him and thus share with him the innermost secrets 
of its business, which in turn would have to be made the gen- 
eral property of all participants, and the danger of his mis- 
understanding the intricacies of a complicated business and 
going back to the men with a mass of criticism, personal and 
otherwise, which will give rise to a dissatisfaction so general 
as to lead to a serious crisis. 

When profits fail, there are always alarms and excursions. 
Anyone who has tried to explain the reasons for such failure 
to a mob of injured stockholders will realize the difficulty of 
making a group of workmen in a large corporation comprehend 
the good and cogent reasons why their extra effort — the sweat 
of their brow and the abrogation of their recreation — should" 
meet with no reward. When in addition there has been some 
mistake in policy, an injudicious sales campaign coupled with 
a large advertising expense for which the sales manager is 
responsible, an unwise change in the manufacturing process 
made by the general manager, or an untimely expansion of 
the business advised by the directors — and such of us as do 
anything, do make mistakes — it is next to impossible to put 
anything into words which will make the workman see why 
he himself should be penalized. Under such circumstances the 
survival of the profit-sharing scheme assumes the aspect of a 
miracle. 



SHOP GOVERNMENT AND PROFIT-SHARING 



439 



Efforts to Overcome the Difficulties 

The reasons for the failure of profit-sharing schemes so 
far given have been fundamental — the arousing of questions of 
human rights, which we are yet unable to solve, tendencies of 
human nature which make the workman feel that his work is 
always the most galling, lack of understanding of problems 
outside his sphere, the difference in viewpoint between the man 
who has his principle between himself and starvation and the 
man who has nothing, the equal distribution of the reward 
between the just and the unjust, the control of exertion but 
not of results, and, most important of all, the lack of reward 
in proportion to effort and accomplishment. Schemes which 
may be said to have succeeded, have been successful in spite 
of these reasons, on account of the personality of their origin- 
ators and the established probity and ability of those in con- 
trol, on account of peculiar or favorable business conditions 
which have been conducive to their survival, because of the 
smallness of the enterprise, or because they have not existed 
long enough to have passed the ordeals by water and by fire. 

Efforts have been made to overcome these difficulties by 
providing for every contingency. The result has been a 
contract which only a lawyer could comprehend. To the work- 
ing man such a document at the best can appear only as a 
sort of complicated raffle from which he may draw a prize. 
If he trusts the boss and the boss says it's all right, he will 
take a chance ; perhaps he will be fortunate, but the connection 
between how hard he works, how little he wastes, and how 
ingenious he can become and what he receives in return for 
his extra effort is so remote that it never occurs to him. There 
is no question that our groping in the dark has been com- 
mendable, and that our employers and corporations have been 
honestly endeavoring to meet a situation and to destroy antag- 
onism which has been unfortunate alike for employer and 
employee, but the solution is not yet. 



440 



AMERICA VS. EUROPE IN INDUSTRY 



Stock Ownership 

Another expedient adopted to enlist the employees' interest 
has been some plan by which he becomes a stockholder. Some- 
times this is arranged in connection with a profit-sharing plan 
and sometimes he is encouraged to buy stock by means of a 
low purchase price or in some other way. The majority of the 
United States Steel Corporation's stockholders are employees 
— some 100,000 of them owning stock in the company. There 
are 135,000 individual shareholders in the Bell Telephone 
Company, one-fourth of whom are employees. Six per cent 
of the Lehigh Valley Railroad's employees are stockholders. 
Employees of a certain Chicago department store own over 
$2,500,000 worth of its stock. Eighty per cent of the employ- 
ees of a large worsted-mill are stockholders, 75 per cent of 
the employees of an equipment company, and 90 per cent of 
the factory force in a large shoe plant. A great deal of the 
capital stock of British cotton-mills is held in small sums by 
spinners and weavers. 

The problems which have to be met in such cases 
are much the same as in the case of the profit-sharing schemes. 
As long as times are good and wages are equal to those in 
the neighborhood, employees are glad to get the extra money 
from dividends. When times are hard, difficult explanations 
are necessary. The connection between individual effort and 
money reward is quite as remote as in the case of profit- 
sharing. 

Shop Government 

The most popular and widely discussed method of enlisting 
the interest of the rank and file employee and furnishing him 
an opportunity to remedy any evils of management which exist, 
is at present the shop government or workmen's committee 
system. Such plans vary all the way from one I found in 
France where each department head called the representatives 



SHOP GOVERNMENT AND PROFIT-SHARING 441 

of his men together once a month and inquired as to whether 
there were grievances, to those in which the books of the com- 
pany are thrown open to duly elected representatives of the 
men, and machinery is arranged by means of which disagree- 
ments between the representatives of the men and the repre- 
sentatives of the management can be arbitrated by outside and 
impartial tribunals with the ultimate decision binding upon 
each. 

Soon after America entered the war there was a perfect 
epidemic of such schemes, fomented in a good many cases by 
the world-wide fear of Bolshevism. In the name of "industrial 
democracv" manufacturer after manufacturer devised schemes 
and put them in overnight. Each proud parent was wildly 
enthusiastic over his child and praised it to the skies. One 
such manufacturer described his millennium of 90 days' dura- 
tion to a large gathering of labor specialists and returned home 
to find his plant in the throes of the biggest strike in its history. 
Another man told me he was running paid advertisements 
in all the papers. describing his plan and that it was increasing 
his sales tremendously. Some manufacturers offered their 
employees "participation in management," which turned out 
to be the sort of participation which a sheep enjoys in the oper- 
ations carried on in a packing house. We went in for indus- 
trial democracy with almost as big a whoop as when we 
entered the war. 

The inevitable reaction followed. Organized labor in- 
veighed against "company unions" and branded industrial 
democracy as a gold brick used to fight unionism. The gold 
wore off the bricks in some cases, and the schemes were thrown 
out. Some manufacturers faced the music and when the "leg- 
islative bodies" voted themselves the inevitable raises, took the 
men to the company's books and showed them exactly why 
further raises were impossible. One company in Cleveland 
even went so far as to hire an ex-labor union official to instruct 



442 AMERICA VS. EUROPE IN INDUSTRY 

the workmen in the intricacies of its books. This man — who 
was thoroughly trusted by all the men — actually held classes 
on company time at which the men were brought, into a hall 
in groups and by means of blackboard figures were shown just 
where the money went and why. The company paid stock- 
holders 8 per cent on the investment and all the rest went 
into reserves to stabilize employment and into wages. In this 
particular case, as a result of the thorough handling of the 
difficulty during the war wages were more than doubled, costs 
increased only 10 per cent, and labor turnover dropped to 
almost nothing. 

Workmen on Boards of Directors 

Some companies arranged to have workmen elected to their 
board of directors. Red hot electioneering, with posters show- 
ing "the workman's friend" laying down the law to a scared 
and cowering directorate, was the order of the day. Once 
the excitement was over the workman sat on the board with 
all the understanding and influence of a farmer who has mis- 
taken a discussion of relativity for the meeting of the Milk 
Producers' League. The sum total of constructive work on 
the part of one such "working man's friend" was a resolution 
to the effect that his boss's pay should be raised ! When his 
term was up he couldn't have been elected sponge-holder at a 
dog fight. Nevertheless, pathetic as it was in a way, the 
effect was to promote understanding between labor and capital. 
The experience showed labor that there was no dirty work 
done in the mahogany boardroom and demonstrated the abso- 
lute necessity for education and specialized knowledge in order 
to manage industry. It was a lot better for everyone than to 
have had the company wrecked by labor troubles brought on 
by inflammatory speeches from some half -crazy agitator, 
simply because the employees didn't know what went on in 
the boardroom. 



SHOP GOVERNMENT AND PROFIT-SHARING 



443 



Lilies of Development 

On the whole the development of industrial democracy 
seemed to follow three main lines : 

1. Participation in management plans, under which the 

employees elected representatives who met the rep- 
resentatives of the management as equals, with pro- 
vision for impartial arbitration, binding to both par- 
ties, in case of disagreement. 2 Books open. 

2. Shop committee plans, which were designed principally 

to enable the workmen to get their grievances be- 
fore the management. The management in this case 
frankly reserved the right to veto without question. 
Books closed. 

3. Various temporizing plans of the "gold brick" variety, 

which led the employees into thinking that they were 
to have a say in the management of the business but 
which — after the elaborate and involved charters 
were put into actual use — developed certain jokers, 
resulting in the management retaining all the power. 

Requisites to Participation in Management 

The difficulty which the working man encounters as soon as 
he attempts to participate in management is the same which 
the farmer would meet should he attempt to participate in the 
discussion of Einstein's theory. You cannot participate in a 
discussion until you know something about the subject. In 
a previous chapter we referred to the Manchester machinists 
who begged for lectures on finance after hearing the expert 
from London. We cited the case of the workmen who spent 
a day in the plant timekeeping office finding out why they 
couldn't be paid off in full each' pay day. A shipyard was 
offered one of the English unions at a nominal price after the 



2 The impartial chairmen in the garment industries were selected by representatives 
of all the employers and of all the employees in the district. 



444 



AMERICA VS. EUROPE IN INDUSTRY 



war. The workman who told me about it said : "They were 
far too downy to be let in for anything like that." American 
trade union officials have stated time and again that the unions 
wanted nothing to do with participation in management. They 
prefer the unmolested right to organize and "a living wage" — 
not the troubles and problems of management. The Virginia 
iron plant which was financed, controlled, and managed by its 
union workmen went into the hands of a receiver last January. 
The employees of a New England jewelry firm refused to take 
over the plant when it was offered them on extremely advan- 
tageous terms. The workmen who seized the factories of Italy 
last August turned them back upon encountering the difficulties 
of management. 

Some day the workmen may exercise real and active con- 
trol of the management of industry. The rank and file have, 
however, a long road of education to travel before they can 
take an intelligent part in the higher activities of management. 
As yet even the best of managers are ignorant of the underlying 
causes of economic phenomena upon which the prosperity of 
each business rests. We have been working nearly three years 
to find a solution for the tangle of international exchange. 
How many men foresaw the November, 1920, slump and got 
ready for it ? Intelligent workmen, both in America and in 
Europe, realize their lack of education and of business training 
and the far-sighted ones are already taking steps accordingly. 
Meantime participation in management is confined mostly to 
shop matters — wages, working hours, and shop conditions 
generally. 

Participation in Management in Italy and France 

The Italian government is at present engaged in working 
out some scheme by means of which the workmen can "par- 
ticipate in management." In one of the large plants I visited 
in July the manager explained to me that the men elect an 



SHOP GOVERNMENT AND PROFIT-SHARING 445 

internal commission every two years. This commission meets 
once a week with the management to take up matters affecting 
working conditions. A great point was made of insistence 
that the workmen elect representatives who really represent 
them — responsible leaders whose agreements they will live up 
to. In case of a dead-lock between the committee and the 
management the dispute is taken before the general workmen's 
confederation and the employers' association. My informant 
complained that most of the labor trouble began in the unp re- 
gressive and reactionary plants. 

In France such councils are not at all common. In one 
plant I visited, each shop elected delegates who met with the 
department chiefs once a month. I was told there were no 
grievance committees, no closed shops, and that comparatively 
few plants had any sort of workmen's representation plan. 

The conseils des prud'hommes are very old, however. The 
first one was created by the law of March 18, 1806, which pro- 
vided for the establishment of such a council at Lyons. They 
were established in Paris in 1847. ^ n 1908 the Paris council 
was reorganized into five autonomous sections which have to 
do with industrial matters and one which has to do with com- 
mercial matters. Each of the sections includes a large number 
of categories of professions and industries and is composed of 
an equal number of employers and employees elected by their 
respective classes. The presiding officer is taken in alternate 
years from the employers and from the employees. The prim- 
ary object of the conseils des prud'hommes is the settlement 
of disputes — usually trivial — between employer and employee. 
Very often servants unjustly discharged seek redress. Appeals 
from the council's judgments may be made when the amount 
involved is over 300 francs. 

In Italy I found one so-called profit-sharing plan which 
seemed to be working admirably. Payments were made 
monthly on a basis of total production and a workmen's com- 



446 AMERICA VS. EUROPE IN INDUSTRY 

mittee ejected workers who refused to co-operate. I was told 
that such plans were rare in France, although co-operative 
plans were common both there and in Italy. 

The Whitley Industrial Councils in England 

In England I made a special point of investigating the 
working of the Whitley Industrial Councils, as there has been 
a tendency in America to regard this plan as a general panacea 
capable of curing all industrial ills. Advocates of various 
works council schemes and uplifters of various sorts have used 
it as a club to drive American manufacturers into workmen's 
representation plans and it has been very much advertised. I 
therefore talked with all sorts of people about its success and 
quote the following more characteristic replies: 

The head of the industrial relations department in a large 
plant made the following comments : 

All right but nothing wonderful. Something of the sdrt 
was necessary in order to get action .on local matters which 
formerly had to be taken up with the headquarters of a 
dozen or more separate unions. Has busied itself mostly 
with such things as petitioning the local authorities to 
change tram schedules, traffic regulation, and the like. The 
more vital matters, such as wages and working hours, are 
still settled with the unions. Inasmuch as all Whitley council 
members are members of the union — many of them being 
union officials — there are naturally no conflicts between 
unions and councils. It is making the employers take more 
interest in the desires of the workmen and so is on the whole 
a good thing. 

The managing director of a very progressive plant said: 

It is a very good thing as it gives the workmen the local 
government which was impossible where everything had 
to be handled through the fifteen different unions in the 
works. The Whitley works committees are quite generally 
organized. The district councils, which under the plan were 
to consist of representatives elected by the workmen and 



SHOP GOVERNMENT AND PROFIT-SHARING 447 

employers of all the plants in each industry, have not come 
to much. Nothing has as yet been done, toward organizing 
the national council made up of representatives of employer 
and employee delegates from the district councils. Our own 
works council meets monthly, alternately on company time 
and on the men's time, there being six representatives of the 
workmen who meet with the management. So far the plan 
has worked very successfully. 

An official of a large steel plant stated: 

Our works council which has been organized for over a 
year consists of three representatives of the management, 
two of whom are directors, one foreman, and six workmen, 
each of these elected by a different department. The com- 
mittee meets every two weeks. The management, of course, 
reserves the right of ultimate decision. The only time the 
question of the workmen participating in management arose 
was when we were drafting the constitution, when one or 
two radicals brought it up, but we, of course, wouldn't 
consider any such thing. 

An official of a large and modern plant had this to say : 

We had a works council before the Whitley plan was 
formulated and it has worked very satisfactorily. There is 
no attempt upon the part of the workmen to take part in 
management. Local welfare matters which cannot be handled 
effectively through the ten or fifteen union headquarters 
are worked out by the councils very satisfactorily. You will 
find a good many works councils in the various plants but 
very few for the various industries (district councils). The 
Whitley council for Great Britain has not yet been organized. 

An official of a plant noted for its welfare work said : "We 
have no trouble with our council which is naturally persuaded 
to the management's viewpoint." 

An official of another steel plant remarked: "We won't 
listen to any of these workmen's committee theorists." 

A man of outstanding ability and great experience in labor 
matters in a strictly neutral position commented as follows: 



448 AMERICA VS. EUROPE IN INDUSTRY 

The difficulty with the Whitley plan is that it is too com- 
plete and too nicely worked out. It is as if a group of highly 
educated but inexperienced university men had gathered 
together and worked out something which was beautiful on 
paper but rather too academic for real life. If they had 
built their scheme around what already existed instead of 
attempting something absolutely new their progress would 
have been much faster. You will find a long published list of 
companies who have councils but you will find a great many 
of the names of the larger and more powerful companies 
absent. 

The managing director of a large and progressive com 
pany said : 

The Whitley Councils have got nowhere in the Engineering 
Trade. The Unions strongly opposed the organization of such 
councils as they desired the unions to be the starting point. 
The Shop Stewards were at first the representatives of the 
unions in a shop or a department who collected subscriptions 
for the unions. These are practically extinct. The Shop 
Steward Committees— -known as "the unjust stewards" — were 
a sort of outlaw organization that got in during the war. 
They were largely Bolshies and fought the unions. 

An official of a plant in Manchester stated : 

Our plan grew out of the shop steward committee move- 
ment, the committee, composed of union men, gradually be- 
coming the Whitley Works Committee. Both men and women 
are elected to the committee, each department electing two 
stewards — a man and a woman. These representatives elect 
a committee of six who meet with the management and do 
the work of the company's old Welfare Committee. They 
meet once a month on two hours of company time. If the 
meeting lasts longer it extends beyond quitting time and is 
on the workmen's time. Union matters, such as wages, are 
also discussed but many things have to go to union head- 
quarters for approval. There is a chance of course of the 
movement splitting the union. At our plant there has been 
no attempt on the part of the committee to take part in 
management. 



SHOP GOVERNMENT AND PROFIT-SHARING 449 

The Workshop Committees — An Employer's Analysis 

Charles G. Renold, managing director of Hans Renold, 
Ltd., of Manchester, analyzes the function of workshop com- 
mittees, at the close of a very able paper, as follows : 

Gathering together the views and suggestions made in 
the foregoing pages; it is felt that three separate organiza- 
tions within the works are necessary to represent the work- 
ers in the highly developed and elaborate organisms which 
modern factories tend to become. 

It is not sufficient criticism of such a proposal to say that 
it is too complicated. Modern industry is complicated and 
the attempt to introduce democratic ideas into its governance 
will necessarily make it more so. As already pointed out, 
the scheme need not be accepted in its entirety. For any 
trade or firm fortunate enough to operate under simpler con- 
ditions than those here assumed, only such of the suggestions 
need be accepted as suit its case. 

The scope of the three committees is shown as follows: 

1. Shop stewards committee 

(a) Sphere. Controversial questions where inter- 

ests of employer and worker are apparently 
opposed. 

(b) Constitution. Consists of trade unionist work- 

ers elected by works departments. Sits by 
itself, but has regular meetings with the man- 
agement. 

(c) Examples of questions dealt with: 

Wage and piece rates. 

The carrying out of trade union agreements. 

Negotiations in re application of legislation 

to the workers represented. 
Introduction of new processes. 
Ventilation of grievances in re any of above. 

2. Welfare committee 

(a) Sphere. "Community" questions, where there 

is no clash between interests of employer and 
woiker. 

(b) Constitution. Composite committee of man- 



450 AMERICA VS. EUROPE IN INDUSTRY 

agement and workers, with some direct rep- 
resentation of trade unions. Sits as one body, 
with some questions relegated to subcommit- 
tees, consisting either wholly of workers or 
of workers and management, according to 
the nature of the case, 
(c) Examples of questions dealt with : 
Shop rules. 

Such working conditions as starting and stop- 
ping times, meal hours, night shift ar- 
rangements, etc. 
Accident and sickness arrangement. 
Shop comfort and hygiene. 
Benevolent work, such as collection for chari- 
ties, hard cases of illness or accident 
among the workers. 
Education schemes: 
Trade technique. 
New works developments. 
Statistics of works activity. 
Business outlook. 
Promotion — explanations and, if possible, 

consultation. 
Ventilation of grievances, in re any of above. 
3. Social union 

(a) Sphere. Social amenities, mainly outside work- 

ing hours. 

(b) Constitution. Includes any or all grades of 

management and workers. Governing body 
elected by members irrespective of trade, 
grade, or sex. 

(c) Examples of activities: 

Institution of clubs for sports — cricket, foot- 
ball, swimming, etc. 

Recreative societies — orchestral, choral, de- 
bating, etc. 

Arranging social events — picnics, dances, etc. 

Provision of games, library, etc., for use in 
meal hours. 

Administration of club rooms. 



SHOP GOVERNMENT AND PROFIT-SHARING 



451 



The Cadbury Plan 

The Cadbury shop committee and works council plan which 
has been in existence since 1919 has the following features of 
interest : 

The Works Council and Shop Committees are for the pro- 
motion and encouragement of good relations between em- 
ployees and the management and are responsible for dealing 
with matters affecting the interests of all at Bourneville. The 
Council consists of 16 representatives, eight from the work- 
ers and eight from the management. There are Shop Com- 
mittees in each department, mainly elected by the workers. 
These are classified according to work in eight groups, each 
appointing a member on the works council. All employees 
over 16 years of age are entitled to vote in the elections. 
Committee or Council Members must be 21 years of age or 
if under 21 have been employed five years. 

Committees of the Councils — for men and for women are : 

1. Welfare and Recreation : 

(a) Library Committee. 

(b) Savings Fund and Thrift Committee. 

(c) Catering Committee. 

(d) Travel Committee (Holidays). 

2. Health Committee: 

(a) Benevolent Committee. 

(b) Accidents Committee. 

3. Rules and Discipline Committee. (Representative sits 

on the Tribunal which considers discipline cases.) 

4. Suggestion Committee. 

5. Wages Committee. 

6. Finance and General Purpose Committee. 

The functions of the Council shall be to take such action 
as may be arranged between the Council and Board (of Di- 
rectors) with regard to any of the matters mentioned above 
and to provide a channel through which any member of the 
Bourneville community may bring forward any matter or 
proposition intended to advance the well-being of all, and 
so promote harmony between the various sections of the 
Works. 



452 AMERICA VS. EUROPE IN INDUSTRY 

The Council shall have executive action in matters dele- 
gated to them by the Board. With regard to other matters 
they shall either act through the Board or after obtaining 
the Board's consent. 

In case of equal voting on the Council (upon which Man- 
agement and employees are equally represented) the sub- 
ject shall be postponed for one month, when the proposers 
shall have the option of again bringing the matter forward 
for consideration. 3 

Some Conclusions 

The conclusions I reached from a study of the situation 
were that: 

1. The Whitley works committees were a good thing in 
England because they permitted concerted and immediate ac- 
tion on local matters which would be almost impossible to 
handle through the ten or fifteen unions represented in each 
plant. 

2. There was little or no idea of such committees "par- 
ticipating in management." When such questions had arisen 
the directors had vigorously expressed their intention to run 
their own business. 

3. The chance of the Whitley committees being used to 
disrupt the unions was very remote as almost all committee 
members were strong union members. 

4. Action of the committees was confined for the most 
part to local welfare matters, the more vital questions, such 
as wages and hours, being generally left for the unions and 
manufacturers' associations to fight out. 

5. There were great variations in the type of organization 
in each case. Several of the largest and most powerful indus- 
tries have refused to organize councils but the movement in 
general is growing and is constantly assuming more definite 
shape. 



3 For those who desire to examine such plans in detail, "Industrial Report No, 2 
on Work Committees" is recommended. 



SHOP GOVERNMENT AND PROFIT-SHARING 



453 



Works Councils in Germany 

In Chapter III we have already referred to the organi- 
zation of the shop councils in connection with the Organized 
Economic System in Germany. During the war many regu- 
lations designed to protect working men were suspended. Dur- 
ing the war, however, employees of large establishments de- 
manded a voice in the drawing up of wage contracts. This 
demand started when the Hilfs Dienst Gesetz — the auxiliary 
service law — was created, which required all men under sixty 
to work in the interest of war production. To offset the work- 
man's loss of freedom of labor contract, workmen's committees 
were granted certain rights and became mandatory in all indus- 
tries. Their duty was to settle controversies between employ- 
ers and employees. If they failed to bring about an agree- 
ment, then arbitration committees created for individual indus- 
tries in different localities were to render the final decision. 
These committees were the forerunners of the later Betrieb- 
srate, or works councils. 

The Betriebsrategesetz, or Works Council Law, of Feb- 
ruary 4, 1920, provided for the replacement of the previous 
councils in all establishments of twenty workers or more. For 
smaller concerns Betriebsobmanner, or industrial arbiters, are 
chosen. These works councils have the deciding vote in all 
socio-political matters, especially those formulating regulations 
for the plants. They are given a voice in the matter of the 
discharge of workmen but not in the management of the plant. 
They are, however, given an insight into the management of 
the plant by the provision that "at the request of the industrial 
representatives, the heads of establishments that regularly em- 
ploy 300 working men and 50 salaried employees, must furnish 
and explain a financial statement. This places the workmen 
legally in a position to support the management in order to 
bring about the highest efficiency and the greatest possible 
economy in the operation of the plant." The employer must 



454 AMERICA VS. EUROPE IN INDUSTRY 

further give information in regard to all processes affecting 
the labor contract and the work of employees and must make 
a quarterly report on the standing and progress of the enter- 
prise and of the industry in general. Furthermore, in enter- 
prises having a board of directors, one or two members of 
the works council have the right to represent on the board 
the interests and demands of the workers and to present their 
views in regard to the problem of the organization of the 
plant. 

When an agreement between the industrial representatives 
and the employers cannot be reached, an arbitration committee 
composed of an equal number of representatives of each, under 
the chairmanship of a disinterested party, makes decision. The 
works councils elect representatives to the Reichwirtschaftsrat, 
or National Economic Council (see Chapter III), which is a 
third house of parliament at least as powerful as the Reichstag, 
which was created by the decree of May 4, 1920, and which 
met for the first time on June 30, 1920. 

The Law of 1920 — Powers Granted 

The law of February 4, 1920, granted the following pow- 
ers to the workers' factory councils, in which all wage-earners 
and salaried employees are given representation in proportion 
to their numbers : 

1. The management is to be supported by the factory coun- 
cil in all industrial operations, ia order to secure the most 
efficient and economic conduct of the business. 

2. The council is to co-operate in furthering the introduc- 
tion of new methods in all productive processes. 

3. The council shall secure the operation against disturb- 
ances arising from disputes among the workers, within the 
council itself, or between the workers and the employer. If 
such disputes cannot be settled by negotiation, the councils 
of wage-earners and salaried employees shall have the right to 
name an arbitration committee and set a time and place for 
adjustment. 



SHOP GOVERNMENT AND PROFIT-SHARING 455 

4. The factory council shall see that the awards and 
adjustments of the arbitration committee are carried out. 

5. The council shall have power to negotiate with the 
employer as to general labor regulations and changes in exist- 
ing agreements. 

6. It shall be the duty of the factory council to promote 
good feelings within the workers' unions as well as between 
them and the employer, and to work for the maintenance of 
the independence of the unions. 

7. The council shall hear grievances of the workers and aid 
in their redress by joint negotiation with the employer. 

8. The council shall co-operate in the administration of 
pension and housing funds as well as in other welfare proj- 
ects of the industry. In the latter case, however, such co- 
operation shall not be effective where existing arrangements 
or rules operative in case of death shall interfere or cause 
a different representation. 

Duties of the Councils 

In addition, the wage-earners' and employees' councils, 
or, where they do not exist, the factory council, shall have the 
following duties : 

1. To see to it that all legal orders favoring the workers, 
the standard wage agreements, and the awards of the recog- 
nized committees of arbitration are carried out. 

2. Where a wage agreement does not exist, to co-operate 
with the industrial unions of the workers concerned in secur- 
ing a regulation of wages and other conditions of labor; es- 
pecially in the establishment of contract and piece-work rates 
and the principles governing such agreements ; in the intro- 
duction of new wage methods; in the regulation of hours of 
labor, especially with reference to lengthening or shorten- 
ing the standard work day; in the regulation of time off for 
the workers; and in the settlement of complaints concerning 
the training and treatment of apprentices. 

3. To make agreements with the employer as to conditions 
of labor and other rules of employment for workers in the 
list of existing wage schedules according to the scale pre- 
scribed in section 80. 



456 AMERICA VS. EUROPE IN INDUSTRY 

4. To investigate complaints and work for their adjustment 
in joint conference with the employer. 

5. In case of disputes to summon the committee of adjust- 
ment or a court of arbitration, if the factory council refuses 
to hear the appeal. 

6. To take cognizance of complaints of dangerous or un- 
healthful conditions in the industry; to support inspection 
officials and others concerned in such matters by advice and 
information; and in addition to work for the enforcement of 
police and safety regulations. 

7. To take all possible care of those injured in war or by 
accident, and to secure for them occupations suitable to their 
strength and capabilities by mediation with the employer and 
their fellow-workers. 

The reader should note especially the fact that these coun- 
cils are formed primarily to "secure the most efficient and 
economic conduct of the business" not to "fight for the em- 
ployees' rights." 

These councils were in operation at the time of my visit. 
In one plant in Berlin employing 13,000 men, each 500 em- 
ployees chose a representative. The 27 representatives thus 
named chose a council of 5 who treated with the management. 
It was reported that the councils were generally functioning 
satisfactorily. The reports which I have since had from Ger- 
many indicate that all is working as desired. 

Growth of Trade Unionism 

Parallel with the growth of works councils has been the 
growth of trade unionism. The International Labor Office at 
Geneva reported in February, 192 1, a growth of from 10,- 
835,000 trade unionists in 20 countries in 1910, to 32,680,000 
in 19 19. Trade union members in the United States during 
that period have increased from 2,100,000 to 5,607,000; Great 
Britain from 2,400,000 to 8,024,000; Germany from 2,960,- 
000 to 9,000,000; France from 977,000 to 2,500,000; and Italy 



SHOP GOVERNMENT AND PROFIT-SHARING 457 

from 817,000 to 1,800,000. This means that the number of 
trade unionists more than doubled in every country during the 
war. 

In spite of recent reaction, the human element has assumed 
since the war started, an importance and a power in industry 
unprecedented in any period of history. The progression was 
made inevitable by dispensation of the popular franchise. Real 
participation in management waits on education. Whether 
or not control of management will pass into the hands of the 
employees will depend upon the development of fitness for 
administration among the rank and file. 



CHAPTER XVIII 

CONCLUSION 

The Industrial Administrator and the Future 

There was a time when, even in America, the business man 
was looked down upon as one who knew only one thing — 
who lacked broad interests and who, therefore, was not quite 
fit to associate with those of "real culture." The business 
man of today knows more about what is really happening 
throughout the world than anyone else. Civilization has now 
become so thoroughly impregnated with industrialism that 
there is hardly anyone left who is not in some way — as stock- 
holder, banker, executive, or employee — dependent upon or 
engaged in industry. 

The present-day administrator, the man who, from a study 
of the facts — economic, sociological, and financial — shapes 
the policy upon which the success of each enterprise depends, 
must be able to predict the future. What else is the budget 
and the financial forecast but a prophecy of future expendi- 
ture and the probable need for capital? What makes a man 
able to predict successfully often enough to conduct his busi- 
ness profitably? Knowledge of the laws to which mankind 
reacts, knowledge of the reaction of races to certain stimuli, 
and knowledge of world economics, as well as that special 
detailed knowledge necessary to the conduct of his own 
business. 

It has seemed worth while then at the end of a year spent 
in the study of management methods in Europe and in com- 
paring conditions there with those which exist in America, to 
attempt to sum it all up and to secure a glimpse of the future 
from a study of what has gone before. Whether he deserves 

458 



CONCLUSION 



459 



it or not the future is largely in the hands of the industrialist. 
His leaders are those who consider conditions which exist, 
who interpret them in the light of real experience with human 
nature, and who throw their influence to the upbuilding of 
humanity. The industrial administrator — if he be worthy of 
his trust — is of this type. 

Warfare and Human Development 

What then does it all signify? What has come to in- 
dustry and to our industrial civilization as the result of the 
war? And what will be the outcome? These questions are 
not so difficult to answer from the standpoint of the changes 
in and the development of specific industrial methods and 
principles as from the standpoint of human development. For 
centuries history has been a repetition of the tragedy of the 
forgotten lesson. What generations and what nations have 
learned by bitter experience has been lost — blown to the four 
winds of heaven with the ashes of Caesar and of Tyre. 

What mankind — the mothers and the fathers of the heroic 
dead, the owners of the wrecked villages and the devastated 
workshops, the outraged girls and the ruined boys — has learned 
from the Great War has been learned by every second genera- 
tion since the dawn of history. But there is this difference: 
In former centuries the horrors of war were passed from 
generation to generation by word of mouth. Nature merci- 
fully so constructs us that we remember the joys and forget 
the sorrows of life. Tales of war, of destruction, and of 
death were, until the middle of the last century, softened in 
the telling by old men recalling the strength of their youth 
before a village hearthstone on a long winter evening. Now 
for the first time in the life of the human race general educa- 
tion and the dissemination of the printed word — photography 
— and the true word picture, boldly painted by the press, have 
placed the common people in possession of the facts about 



460 AMERICA VS. EUROPE IN INDUSTRY 

war. Much that has been written is already forgotten — but 
mankind has had its first chance since history dawned to 
remember and to profit by its lesson. 

Industrial Effects of the War 

Industrially the outstanding results of the war may be 
summarized as follows : 

1. The pooling of knowledge of processes, methods, and 

principles of management. 

2. The enormous increase in the size of industrial units. 

3. The growth of the idea of the responsibility of man- 

agement to the public. 

4. The recognition of the right of workmen to partici- 

pate in the control of industry. 

5. The realization upon the part of labor that authority 

carries with it responsibility — that labor is not the 
only factor in industry. 

These five developments naturally occur together. As 
those in control of various plants were forced by the enemy 
to share their knowledge with each other, the value of asso- 
ciation became evident. When industrial units became so 
large that a large section of the public in a community, each 
with the right to vote, were employees of a single firm, it 
became unsafe to treat employees other than as a public to 
be pleased. The natural outgrowth of this was to enlist the 
co-operation of the public by asking their advice and by 
endeavoring to follow a managerial policy which would stand 
the light of public opinion. 

With this growth of industry out of the condition in which 
the owner could keep in personal touch with each of his em- 
ployees, new administrative and executive control methods 
necessarily developed. What Franklin could do personally 
Henry Ford must do through a department of personnel, a 



CONCLUSION 461 

statistical and accounting department, through industrial and 
technical engineers, works managers, sales managers, and fi- 
nancial managers — all equipped with mechanisms and tools 
to extend and multiply the activities of the brain and hand 
of the master mind ten thousand fold. Today policies must 
be more accurately determined. Franklin could try one policy 
in his shop in the morning and if the afternoon's work proved 
it unwise, he could alter it with comparatively little trouble 
or loss. Today the word that affects 100,000 families, decides 
upon the erection of a $1,000,000 factory, or alters a sales 
policy in an organization reaching half across the world, must 
be carefully weighed before it is uttered. 

The industrial leader's responsibility toward the com- 
munity has increased as larger sections of it have come under 
the control of the individual. The dream of service to man- 
kind has drawn the young man who formerly went into the 
ministry into industrial relations work. The university pro- 
fessor has turned his attention from the humanities to the 
betterment of industrial conditions. As the scientific method 
has been applied to industrial problems, the rule-of -thumb 
methods of the groping pioneer and the "isms" of the inexpe- 
rienced with an ideal have given way. Science, ideals, and 
experience have merged and have produced a true science of 
managment — a science which fulfils Huxley's definition of 
"organized common sense." 

The next step is the education of the stockholder to sup- 
port the new type of administrator — to forego immediate 
dividends for future stability, to realize his personal respon- 
sibility, to be satisfied with moderate earnings for the sake of 
public confidence, to insist upon knowledge of the means by 
which dividends are produced and satisfaction as to their being 
earned by methods which will continue to result in public con- 
fidence, rather than to insist merely upon their frequency and 
size. Industrial stocks are still considered risky and must show 



462 AMERICA VS. EUROPE IN INDUSTRY 

large earnings in order to find buyers. When industry has 
been stabilized, methods of management which are now nec- 
essary to produce dividends sufficient to attract capital will 
not be needed, and another vicious circle will be destroyed. 
Industrial management has already become a profession. As 
knowledge continues to accumulate and to be disseminated, 
the constituency of each industrial administrator will insist 
upon a training no less thorough, a competence no less com- 
plete, a code of ethics no less high than do those individuals 
who trust their fortunes and their lives to the lawyer and to 
the physician. 

The plague of social and political disorder which followed 
the war — the industrial and social collapse of Russia, Italy's 
mild attack of Bolshevism and the touch of the fever which 
was felt by England, Germany, France, and America — taught 
all parties to industry a lesson. This lesson can almost be 
reduced to a formula : 

When X, which consists of: 

A — or the Inertia and Dislike of change inherent in 
human nature 
and of: 

B — or the fear of consequence of revolt, as: 
a — Death and injury 
b — Loss of property 
c — Starvation and privation 
is outweighed by Y, which consists of : 

M— or real injustice to the masses — whether it comes from 
capital, government, or act of nature 
and of : 

N — or belief that injustice is the work of a definite group 
which can be defeated 
and of : 

O — Excitation by: 

a — Inspired leaders of human progress 

b — Inexperienced uplifters 

c — Demagogues with an axe to grind 



CONCLUSION 463 

the existing organisation is overturned regardless of conse- 
quences. The formula then is: 

X>F = Industrial and Social Peace 
X<F •— Industrial and Social Revolution 

The responsibility of each class then is evident. The les- 
son is there. All classes must read it aright if twentieth 
century civilization is to endure. 

Education vs. Powers of Destruction 

Since the war closed immense strides toward world indus- 
trial consolidation have been made. Immense strides have 
been made in the dissemination of knowledge as to principles 
and methods of administration. Knowledge of industrial proc- 
esses and mechanisms have spread throughout the world. 
The race is now between education — the education of stock- 
holders, of managers, and of employees to the principles and to 
the ideals which have survived the trial by fire — and the pow- 
ers of destruction. Will the passions of man, inflamed by 
selfishness and greed and by appeals to his lower nature, burst 
forth in anger and destroy all that industry has wrought, or 
will the knowledge brought forth in bitterness and sorrow 
reach the uttermost ends of industrial civilization quickly 
enough and forcibly enough to enable man's better nature, for- 
tified with a knowledge of what is worth striving for and of 
the value of service, to save itself from destruction? The 
responsibility rests with each of us individually. Are we will- 
ing to learn and willing to teach? Are we each setting our 
own house in order? The survival of civilization hangs in 
the balance, and the leaders of industry — the men who are 
shaping the policies of our great corporations — must point 
the way. 



APPENDIX A 

DEFINITIONS OF BRITISH LABOR TERMS 1 

From the "British Employers' Year Book" 

In America party and labor terms are very loosely used. 
To clarify the text and to illustrate the viewpoint of the em- 
ployer in England it has seemed wise to quote certain defini- 
tions from the "British Employers' Year Book" — which gives 
nineteen 8 x 10 pages of such definitions. 

Anarchism. An Anarchist in theory is one who recognizes no law 
except the law of nature; he is without ties of Church, of family, 
of State, or of nation; and takes no part in the formation of a 
common conscience or general will. 

Black-Coat Labour. The people who work for the political aims 
of the Labour Party, but who are not of the class usually de- 
scribed as Labour. 

Blackleg. A trade-unionist who continues at work after a strike 
is started; also a non-unionist who takes the place of a striker. 

Bolshevism. The policy of the extremist section of the Socialist 
parties of Russia. The policy is destruction of capital and land- 
lordism, effected by the killing of capitalists and the more highly 
educated people generally; the nationalisation of all industry; 
the coercion of labour to prevent starvation; the prohibition of 
trade-unionism; the stoppage of freedom of the Press; and the 
prompt execution of anyone suspected of being anti-Bolshevist. 

B. S. P. British Socialist Party. Successors to the Social Demo- 
cratic Federation and made up largely of othodox followers of 
Karl Marx. 

Bureaucracy. A Government run by departments, each under a 
chief. 

Ca' Canny. To go slow; to waste time; and to reduce output of 
work deliberately. 



a The matter here given refers to Chapter IV. 

464 



DEFINITIONS OF BRITISH LABOR TERMS 465 

Capitalism. The existing social system, based on the rights of 
private ownership of land and property, common to all civilised 
countries hitherto. 

Collectivism. The policy of State management of land and industry, 
as opposed to Individualism, or private freedom and open com- 
petition. Nationalisation is Collectivism. 

Communism. Common control and ownership of everything; which 
when established is a result in "the ordered demand and supply 
of all those things essential to a happy human existence; all 
would have a new life with leisure, wealth, and freedom." There 
are two Communist organisations — the "Communist League," 
and the "Communist Party"; the latter was formerly the "Work- 
ers' Socialist Federation." Both groups "repudiate parliament- 
ary and municipal action and believe in the Soviet form of ad- 
ministration, and the dictatorship of the proletariat." 

Compagnons de lTntelligence. Comrades of the brain workers; 
a French union of the middle classes to resist tyranny of either 
Labour or Capital. 

Craft-Union. A trade-union based on actual craft, for instance, 
Boilermakers, as distinct from Industry-union based on a whole 
industry, like National Union of Railwaymen. 

Democracy. Any form of Government of a country which is under 
the ultimate control of the people as a whole, the people being 
the sovereign authority. The method of making that authority 
effective is usually by some system of voting to establish the 
will of the majority of the people, for a nation is hardly ever 
of one mind, and on many questions great numbers of the citizens 
have no opinion at all, and it is formed for them. (See "Oli- 
garchy.") 

Dilution. The use of non-unionists in a trade-unionist occupation. 

Fabian Society. A Socialist body formed in 1884 under Mr. Sidney 
Webb and other middle-class followers of Karl Marx, who yet 
are not able to accept Marx's claim that manual labour produces 
all wealth, and should, therefore, own it all. They believe in 
brainwork being credited also; but that the State should control 
and direct all industry, and supply all the people with the means 
for a comfortable life; to which ends Capitalism must be de- 
stroyed. Their aims, as expressed in the prospectus of the So- 
ciety, are "the organisation of Society by the emancipation of 
land and industrial capital from individual and class ownership, 



466 APPENDIX 

and the vesting of them in the community for the general benefit." 
Their membership in 1913 was 2,800; in 1919, it was 2,140, in- 
cluding many women. The Fabians want the change made grad- 
ually, constitutionally, and with all kindness possible; the real 
Marxian Socialists know it needs red-revolution, which has 
grown greatly in popularity of late years. The members have 
exercised wide influence through the I. L. P. and trade-unions, 
on the Labour Party generally. 

Guild-Socialism. A variety of Socialism which consists in organis- 
ing Labour into great industrial unions, or National Guilds; 
which (after destruction of Capitalism) will assume control of 
the various industries, and then combine by a Central Guild 
Congress, which will co-operate with the State, which is to 
occupy itself with internal and external order. To effect this, 
an absolute necessity is "the abolition of Capitalism and the wage 
system." The constructors of Guild-Socialism were mostly 
Fabians originally. 

I. L. P. Independent Labour Party. Formed in 1893 by a number 
of Socialists, like Keir Hardie, with intention of getting influence 
in trade-unions, and nominating Socialists for Parliamentary 
elections. The general object is "to establish the Socialist State 
when land and capital will be held by the community." 

Intellectuals. Generally used to describe middle-class people who 
co-operate with Labour or with revolutionary associations in 
movements for destroying existing social and industrial systems. 

Jacobin. A member of the Jacobin Club of Paris in the early days 
of the French Revolution; and since applied both in France and 
England to theoretical advocates of revolution; described by 
Burke in the words, "This sort of people are so taken up with 
their theories of the rights of man, that they have totally forgot 
his nature." 

Labour Party. Applied generally to the body directing political 
efforts of Labour. It was originally "a federation consisting of 
Trade-Unions, the I. L. P., the Fabian Society, and a large number 
of Trades Councils, and local Labour parties." The trade-unions 
supply the bulk of the membership, and of the funds; but the 
active Socialists determine the policy. It has supplied a number 
of notably good and useful members of Parliament; but a good 
record in Parliament has usually aroused opposition on the part 
of the real controlling power of the Socialist minority of the 



DEFINITIONS OF BRITISH LABOR TERMS 467 

Party. The ultimate source of power of the Labour Party de- 
pends on the votes of the members of trade-unions ; but the 
great majority of those members are silent; and their votes 
when they trouble to give them are manipulated by the active 
organisers of policy. 

Nationalisation. Taking a business, or an industry, or a property, 
from private ownership into Government control; substituting 
Collectivism for Individualism. 

N. D. L. P. National Democratic and Labour Party (British 
Workers' League). A party with a patriotic and constitutional 
policy for Labour and all other classes; advocating individual 
freedom and unrestricted production; opposing the tyranny of 
trade-unions when their leaders propose Socialistic aims ; defend- 
ing national security and Empire unity. The party's nominees 
at the last General Election defeated several well-known mem- 
bers of the I. L. P., including Macdonald, Outhwaite, Henderson, 
Jowett, Robertson. 

N. S. P. National Socialist Party. Formed chiefly by those patri- 
otic members of the British Socialist Party who were supporters 
of their country in the war. 

Oligarchy. Government by a few. Whether in the actual Govern- 
ment of the country, or in the formation and directing of opinion 
among the people as a mass, the influence of the few over the 
many is always most powerful. 

Plebs League. The propagandist section of the Central Labour 
College in the teaching of Socialism and class-war throughout 
the country. 

Sabotage. Destruction of property; spoiling or destroying work 
secretly. 

Shop Stewards. The establishment of these is part of the Rank- 
and-File Movement, which came into public notice early in 19 16, 
and was worked chiefly by the I. L. P., assisted by all the revo- 
lutionaries in the country. It was a movement to destroy the 
authority of the old trade-union leaders; to undermine discipline; 
to work on the wilder members of the unions ; and to start strikes 
locally all over the country and then force the Government into 
concession after concession so as to secure the domination of 
labour. 

S. L. P. Socialist Labour Party. One of the three Socialist parties. 
Membership is based on the belief that a class-war is the first 



4 68 . APPENDIX 

essential of reform. It is devoted to the worship of Karl Marx. 
Socialism. A term used for many differing policies. In essence it 
means getting rid of Capitalists and Landlords. Socialists differ 
widely as to how it is to be done, and as to what will follow when 
it is done. Some propose gradual and constitutional action by 
taxing capitalists and landlords out of existence; others favour 
a policy of bloodshed. Then there is complete disagreement 
among Socialists about the policy of the changed world, and 
whether the land and the capital shall belong to one central 
Government, the State, acting for all; or whether it shall be 
divided between trade groups or Guilds; or whether everyone 
is to help himself to what he can lay hands on. 
S. P. G. B. Socialist Party of Great Britain, who wage war on all 

who differ, whether Labour or Capital, and follow Marx. 
Strikes. As denned by the Industrial Worker, organ of the I. W. W., 
consist of : 

The Stay-in Strike — folding the arms while on the job. 
The Irritation Strike — continuously coming out and going back. 
The Lightning Strike — stopping without notice. 
The Opportune Strike — stopping when very urgent orders are 
in hand. 
The final Universal Strike — seizing the factories and locking 
out the employers. 
Trade-Unions. Associations formed among members of the same 
trade for promotion of their mutual interests and protection of 
their rights. They were illegal in England, the home of trade- 
unionism up to 1824, although some 47 of them existed; and their 
powers were limited up to 1871. In 1885 the Socialist influence, 
became important, and after 1893 the I. L. P. greatly increased 
this influence, and in 1900 the Labour Party was established to 
secure a Labour group in Parliament, with members paid mostly 
from trade-union funds, and pledged to abstain from joining any 
section of the Conservative or Liberal parties. The I. L. P. and 
Socialist influences have been increasingly evident in the Labour 
Party. Only a few of the trade-unions appear actively in political 
matters. The number of trade-unions at the end of 1918 was 
1,220, with a total membership of 6,624,000, of whom 1,220,000 
were women. A very large increase occurred during the war. 
A number of trade-unions are now so directed in policy that 
they oppose all payment by results, bonus systems, or profit- 



DEFINITIONS OF BRITISH LABOR TERMS 469 

sharing, and, incidentally, many schemes making for harmony 
between employers and employed. Their real aims are now poli- 
tical, and directed to a complete change of the industrial system. 

Triple Alliance. A working arrangement, or combination, for cer- 
tain purposes, between the leaders of three of the big trade-unions 
— the Miners, Railwaymen, and Transport Workers — to bring 
pressure on the Government and public by a strike, or threat of 
a strike, which would paralyse all industry and food distribution. 

Victimisation. The punishment in any way, after a strike, of a 
worker or a firm for actions during a strike. 

Whitley Committees — Works Committees. Committees formed in 
works of representatives of both employers and employed, for 
the purpose of mutual understanding, harmonious working, and 
securing the best efficiency. 



APPENDIX B 

THE TRAINING OF WORKERS— A BRIEF 
REFERENCE LIST 1 

The writer realizes that the list here given is by no means 
complete, and that the titles of many valuable works have 
unquestionably been omitted. What is here given is virtually 
his own working list. The titles are set down in the hope 
that they may perhaps prove useful to other persons. 

Allgemeinen Elektricitats Gesellschaft, Berlin, Ausbildung Gewer- 
blicher Lehrlung Lehr Plan. Psychotechnische Eignungspru- 
fung. Werkschuleder Fabriken, Brunnenstrasse. 

Die Berufseignungs Prufung Unserer Lehrlinge, Berlin, Ludwig 
Loewe und Kompanie. 

Continued Education Under the New Education Act. The Labour 
Party, 33 Eccleston Square, London, S. W. I. 

Engineering Progress. October, 1920. Berlin, Auslandverlag, G. M. 
B. H., Berlin, S. W. 19. 

Ferguson, R. W. Evolution of a Day Continuation School Scheme. 
Bournemouth, England, Education Committee, Cadbury Brothers, 
Ltd. 

Fleming, A. P. M., and Pearce, J. G. The New Management. Lon- 
don, "Business Organization and Management," October-De- 
cember, 1920, January, 1921. 

Geddes, Auckland. Recent Changes in British Education. Wash- 
ington, School Life, June 15, 1920, pp. 5-7. 

Address delivered at the National Citizens' Conference on 
Education called by the Commissioner of Education, Washing- 
ton, D. C, May 21, 1920. 

Godfrey, Hollis. Co-operation Between Industry and the Colleges. 
New York, Educational Review, June 1920, pp. 42-51. 

Great Britain. Education Act of 1918. London, H. M. Stationery 
Office. 



J This appendix refers to Chapter XVI, 

470 



THE TRAINING OF WORKERS 



471 



Halsey, G. D. Outline Course of Twelve Meetings for Foremen, 
Chicago, Personnel, January 1921, pp. 1^5. Published by the 
Industrial Relations Association of America 

Hickey, T. P. Linking Education with Factory Profits. Chicago, 
Factory, November 1920. 

Industrial Relations Association of America. Transactions 1919 ta 
date. East Orange, N. J., 564 Main St. ; formerly National 
Association of Employment Managers. 

Leverhulme, W. H. Lever, 1st Baron. Standardization Welfare, an 
address to the students of Sheffield University. Port Sunlight, 
England, Lever Brothers. 

Mensforth, H. Some Phases of Works Management. Proceedings 
of the Manchester Association of Engineers, Manchester, Eng- 
land. 

Moede, Dr. Psychotechnical Tests. The author, University of Char- 
lottenberg, Berlin, Germany. 

National Association of Corporation Training. Proceedings, 1913 
to date. New York, 130 East 15th Street. 

Society of Industrial Engineers. Industrial Education. Complete 
report of the proceedings of the fall national convention, Pitts- 
burgh, November 10-12, 1920. Chicago, 1921. 245 pp. (Pub- 
lications Vol. 4, No. 1.) 

Terman, L. M. Condensed Guide for the Stanford Revision of the 
Binet-Simon Intelligence Tests. Boston, Houghton, Mifflin 
Company, 1920. 32 pp. 

United States. Department of Labor, Training Service. British 
Methods of Training Workers in War Industries. Washington, 
1918. 68 pp. (Bulletin upon Training and Dilution No. 3.) 

United States. Federal Board for Vocational Education. Job 
Specification. Washington, 1919. 64 pp. (Bulletin No. 45.) 

Unsere LehrlingsAusbildung. Berlin, Ludwig Loewe und Kom- 
panie. 

Yoakum, C. S., and Yerkes, R. M., editors. Army Mental Tests. 
New York, Henry Holt and Company, 1920. 303 pp. 

The National Institute of Psychology and Physiology applied to 
Commerce and Industry (George H. Miles, D. Sc, Secretary, 329 
High Holburn, London, W. C. 2, England) gives, in some of its 
literature, some exceedingly interesting results of — 

1. The elimination of unnecessary movements and other labour- 
saving methods. 



472 



APPENDIX 



2. The effects of fatigue on output. 

3. The personal qualities required for success in different occu- 

pations. 

As a bibliography the Institute lists — 

Drury, H. B. Scientific Management. New York, Longmans, 

Green and Co., 1918. 
Gantt, H. L. Industrial Leadership. Yale University Press, 1916. 
Gantt, H. L. Work, Wages, and Profits. New York, Engineering 

Magazine Company, 1913. 
Gilbreth, F. B. and L. M. Fatigue Study. New York, Sturgis and 

Walton, 1916. 
Gilbreth, F. B., and L. M. Motion Study. Montclair, N. J., The 

authors, 1916. 
McKillop, M., and A. D. Efficiency Methods. London, Routledge 

and Sons, 19 17. 
Muscio, B. Lectures on Industrial Psychology. London, Routledge 

and Sons, 1914. 

Particularly good literature introducing the new employee to the 
plant is published by the Westinghouse Company at East Pittsburgh, 
Pennsylvania; by the Cincinnati Planer Company at Cincinnati, 
Ohio ; by the Larkin Company of Buffalo, New York ; by the Printz- 
Biederman Company of Cleveland, Ohio; by the Miller Lock Com- 
pany of Philadelphia, Pennsylvania; by Morland and Impey, North- 
field, Birmingham, England; by Cadbury Brothers, Bourneville, 
England, 



APPENDIX C 

PROSPECTUS OF AN ENGLISH DAY 
CONTINUATION SCHOOL 1 

Session 1919-1920 
Object of the School 

The Blank Company Day Continuation School is intended to pro- 
vide a sound, practical, continuation education along lines required 
by the Education Act of 1918, for all the junior employees of the 
Firm. 

In the Boys' Department a three-year course is planned for all 
boys between the ages of 14 and 17 years. In the Girls' Department 
two distinct types of classes are provided, a two-year general course, 
and a two-year commercial course, for all the girls between the ages 
of 14 and 16 years. 

Control of the School 

The School premises situated at the No. 1. Works consist of class- 
rooms, a science laboratory, gymnasium, and boys' and girls' common 
rooms. These are provided by the Firm together with all permanent 
equipment. The Manchester Education Committee are responsible 
for the educational conduct and efficiency of the School, including 
the supply of staff and arrangement of the curriculum. All material 
other than that of a permanent character is provided by the Man- 
chester Education Committee, as in the case of other schools under 
their control. 

Subjects of Instruction 
Boys' Department 

The technical courses are planned with a view to enabling the boys 
to take up a further technical education in the technical institutions 
of Manchester and district. 

Practical Mathematics — including Arithmetic, Algebra, Mensura- 
tion, Trigonometry, etc., all treated practically and illustrated from 
workshop problems and calculations. 



^he matter in this appendix refers to Chapter XVI, 

473 



474 



APPENDIX 



Engineering Drawing — including Construction and Geometry as 
well as Handsketching and Practical Machine Drawing. 

Workshop Practice — a practical course of Woodwork co-ordinated 
with the Mathematics and Science of the School. Lessons on the 
care of tools, sharpening tools, growth and uses of timber are given. 

English — a course of study designed to widen the pupils' horizon, 
train him in self-expression and encourage in him a love of reading. 
History, Geography, and Duties of Citizenship are all included. 

A well-stocked School Library is instituted for the boys' use and, 
in addition, full use is made of the magnificent Technical Library 
of the Firm. 

Engineering Science — This course consists of lectures and prac- 
tical work in Physics, Mechanics, and a study of Heat as applied to 
Heat Engines. 

Physical Exercises and Games — Lessons will be given by a trained 
instructor in a specially equipped room. The lessons include games 
and various exercises, all being, besides a relaxation of the brain, 
a training in the control of the muscles and nerves by the will. 

In suitable weather, outdoor games are played on the Playing 
Fields adjoining the works. 

Girls' Department — General Courses 

Arithmetic — including household bills, short methods of calculating, 
general mensuration from a consideration of problems met with in 
household affairs. 

English — including English Language and Literature, letter-writing, 
etc. 

In order that the students may study books of travel with intelligence 
and interest and also to broaden their outlook on life, the School 
Library will be used extensively and occasionally English lessons will 
be devoted to the study of the broad physical and geographical facts 
which control the activities of mankind. 

Needlezvork — This course aims at teaching the girls to make and 
repair their own clothing and domestic articles and cultivating their 
taste for harmonious colourings. 

Girls' Department — Commercial Courses. 

Arithmetic and Accounts — Including decimals, mensuration, 
methods of decimalisation of money and weights and measures, 
graphs. Closely related to this course will be a study of Accounts 
and Accounting methods. 



AN ENGLISH DAY CONTINUATION SCHOOL 475 

English — The English will be taken along similar lines to the 
English of the General Courses. Commercial letters will be written 
and the English will have a bias towards commercial requirements. 

Shorthand — Pitman's System will be taught. 

Tutorial Classes for Girls — These classes will be devoted to the 
development of the natural bent or inclination of each student. The 
students will select their own subject of study and careful guidance 
will be given by a teacher who will be in attendance and control each 
class. The students will be encouraged to develop their self-reliance, 
originality, and ingenuity. 

Physical Exercise — The physical exercises will consist of free exer- 
cises and organized games, both indoor and outdoor, including team 
games. 

Social Life of the School 

The Pupils are encouraged to govern themselves through the various 
School activities. Boys' and Girls' common rooms have been opened, 
where various indoor games are played. The control of these com- 
mon rooms is in the hands of the Continuation School Council, a body 
elected by the students themselves. 

The School is a self-governed community and many valuable les- 
sons are learned by the students in the practice of good comradeship 
in the school. 

The help of the Blank Company Social Union is enlisted in the 
providing of tackle for the various activities and the boys are encour- 
aged to join the Athletic Clubs (Football, Swimming, Cricket, etc.) 
of the Social Union. 

Homework 

Home lessons are a necessity if a student is to make full use of 
the instruction given in the School Course, and homework forms a 
regular part of the School programs. Their success depends largely 
upon the influence of the home and in this matter the co-operation 
of the students' parents is earnestly invited. 

School Reports and Scholarships 

Reports on attendance, conduct, ability, etc., will be issued each 
term. Two Scholarships will be awarded at the close of the School 
Year, providing free tuition in the Day Continuation Classes at the 
College of Technology, Manchester. 



476 APPENDIX 

Special Classes 

Commercial courses are institutes for girls, over 16 years of age 
employed in the clerical and accounts' departments. . The subjects 
of instruction include Business Arithmetic and Accounts, Shorthand, 
English Correspondence, English Literature, and the Theory and 
Practice of Commerce. 

Evening Classes 

Evening classes for men are held on the school premises. The 
subjects of instruction for these classes are Mathematics and Me- 
chanics. The classes and curriculum are arranged to meet the 
requirements in Mathematics and Mechanics of the various types 
of work done in the departments. 

Boys' Woodwork Class — A class for boys who have passed through 
the ist and 2nd year Woodwork courses in the Day School is held 
in the evening. 

The boys are encouraged to invent their own models and after 
producing the necessary drawings and specifying the amount of ma- 
terial and operations necessary, construct the model under the super- 
vision of the teacher. 



APPENDIX D 

SHOP GOVERNMENT AND PROFIT-SHARING- 
ENGLISH AND GERMAN WORKS 1 

Complete and detailed consideration of the subjects of 
shop government and profit-sharing would require at least 
two volumes of this size. For the benefit of those who wish 
to go more fully into these subjects the following sources of 
information are suggested: 

Part I — Profit-Sharing 

Bayfield, A. F. Lehigh Valley Plan for Selling Stock to Employees. 
New York, Railway Age, November 19, 1920, and Chicago, 
Manufacturers' Nezzfs, January 6, 1921. 

Burritt, A. W., and others. Profit-Sharing; Its Principles and Prac- 
tice. New York, Harper and Brothers, 1918. 328 pp. 

This is probably the most complete and comprehensive work 
on profit-sharing. 

Great Britain, Commercial Labour and Statistical Department. 
Profit-Sharing and Co-partnership Abroad. London, H. M. 
Stationery Office, 1914. 164 pp. 

Great Britain, Ministry of Labour Intelligence and Statistics Depart- 
ment. Profit-Sharing and Labour Co-partnership. London, H. 
M. Stationery Office, 1920. 244 pp. 

Lever Brothers Ltd. Port Sunlight, England. "Co-partnership" in 
"Standardizing Welfare." 

National Association of Corporation Training. Committee on 
Profit-Sharing and Allied Thrift Plans. Report. (In Eighth 
Annual Proceedings, New York, 1920, pp. 469-536.) 

National Civic Federation. Profit-Sharing by American Employees; 
Examples from England, Types in France. New York, National 
Civic Federation, 1920. 423 pp. 



*The matter in this appendix refers to Chapter XVII, 

477 



4 yS APPENDIX 

United States. Bureau of Labor Statistics. Profit-Sharing in the 
United States. Washington, 1917. 188 pp. (Bulletin 208.) 

Part II — Shop Government 

American Academy of Political and Social Science. Industrial Sta- 
bility. Philadelphia, 1920. 177 pp. 

American Academy of Political and Social Science. Social and 
Industrial Conditions in the Germany of Today. Philadelphia, 
1920. 166 pp. 

American Multigraph Company. Multigraph Industrial Democracy. 
Cleveland, Ohio. 

Bagley, B. D. Timely Survey of Shop Committee Plans. Rochester., 
N. Y., Underwriters of Rochester, 1920. 

Betriebsratgesetz ; Textausgabe. Berlin, Carl Heymanns Verlag, 
1920. 

Cadbury Brothers. Bourneville Workshop Committee and Works 
Council. Bourneville, England, 19 19. 

Carpenter, O. F. Shop Committee That Failed. New York, Indus- 
trial Management, January I, 1921, pp. 59-62. 

Carpenter, O. F. Two Years of Industrial Legislation in a Large 
Clothing Factory. Washington, Monthly Labor Review, August, 
1920, pp. 234-245. 

Collins, J. H. Bear Times and the Employee Stockholder. Phila- 
delphia, Saturday Evening Post, May 21, 1921, pp. 12-13. 

Cowdrick, E. S. Successful Trial of Industrial Representation Plan ; 
The Colorado Fuel and Iron Company. New York, Industrial 
Management, February 1, 1920, pp. 123-125. 

Garton Foundation. Industrial Council for the Building Industry. 
London, Harrison and Sons, 1919. 153 pp. 

Gee, Philip, Editor. Employers' Year Book. London, 246 Temple 
Chambers, 1920. 412 pp. 

Partial contents : Conciliation in Trade Disputes, by Lord 
Askwith; Whitley Councils, by J. H. Whitley; Bridging the 
Gulf, by J. D. Stevens; Co-partnership and Profit-Sharing, by 
Lord Robert Cecil; Premium Bonus System, by Douglas Vickers 
and others. 

German Works Council Law. Washington, Monthly Labor Reviezv, 
May, 1920, pp. 172-181. 

Goodyear Tire and Rubber Company, Industrial Representation 
Plan. Akron, Ohio, 1919. 84 pp, 



SHOP GOVERNMENT AND PROFIT-SHARING 479 

Great Britain. Civil Service, National Whitley Council. 

Report of the Cost of Living Committee appointed by the 
Civil Service National Whitley Council. London, H. M. Sta- 
tionery Office, 192 1. 5 pp. 

Great Britain, Ministry of Labour. Industrial Councils. The 
Whitley Report. London, H. M. Stationery Office, 1917. (In- 
dustrial Report No. 1.) 

Great Britain. Ministry of Labour. Industrial Councils and Trade 
Boards. London, H. M. Stationery Office, 1918. (Industrial 
Report No. 3.) 

Great Britain. Ministry of Labour. Work Committees. London, 
H. M. Stationery Office, 1918. (Industrial Report No. 2.) 

Howard, E. D. The Hart, SchafTner and Marx Labor Agreement; 
Industrial Law in the Clothing Industry. New ed. Chicago, 
Hart, Schaffner and Marx, 1920. 97 pp. 

Industrial Relations Association of America. Proceedings of Con- 
vention Held at Cleveland, May 21-23, I 9 I 9- East Orange, N. J., 
564 Main St. Formerly the National Association of Employment 
Managers. 

Jacobstein, Meyer. Can Industrial Democracy Be Efficient? New 
York, Bulletin of the Taylor Society, August 1920, pp. 153-159. 
Abstracted in Monthly Labor Review. December 1920, pp. 
1218-1219. 

Jones, E. D., compiler. Bibliography of Employment Management. 
Washington, Federal Board for Vocational Education, June, 
1920. 119 pp. (Bulletin No. 51. Employment Management 
Series, No. 9.) 

Kiesche and Syrup. Kommentar zum Betriebsratgesetz. Berlin, 
Carl Heymanns Verlag. 

Lee, J. Industrial Control. In his Management; a Study of Indus- 
trial Organization. London, Sir Isaac Pitman and Sons, 1921. 

2 S pp. 

Leitch, John. Man to Man; the Story of Industrial Democracy. 
New York, B. C. Forbes Company, 1919. 249 pp. 

Meeker, Royal. Employees' Representation in Management of In- 
dustry. Washington, Monthly Labor Review, February 1920, 
PP- 305-3!8- 

The Pennsylvania Plan; Details of the Agreement Between the 
Management and the Employees of the Pennsylvania Railroad 



4 8o APPENDIX 

System. New York, Industrial Management, February I, 192T, 

PP. 147-148. 

Piez, Charles. The Baneful Influence of Adjustment Boards. Chi- 
cago, Manufacturers' News, January 20, 1921. 

Renold, Hans, Ltd. Workshop Committees — Suggested Lines of 
Development. Hans Renold, Ltd., Manchester, England, 191 7, 

Resolved: That the Workers Should Participate in Management. 
Debate before the New York Chapter of the Society of Indus- 
trial Engineers. Affirmative — W. M. Leiserson and John Leitch. 
Negative — Harrington Emerson and Harry Franklin Porter. 
Chicago, Business Crucible, March-April 1921. 

Self-Government in the Building Industry in Great Britain. Wash- 
ington, Monthly Labor Review, October 1920, pp. 792-797. 

Stoddard, W. L. Trade Unionism versus Shop Committees. New 
York, Industrial Management, April i, 1921, p. 310. 

Stove, Hermann. Gesetz Uber Betriebsrate. Berlin, Carl Hey- 
manns Verlag. 

Wallace, W. History of Profit-Sharing in the British Isles. New 
York, Industrial Management, February 1, 1921, pp. 85-89. 

Wolfe, A. B. Works Committees and Joint Industrial Councils. 
United States Shipping Board Emergency Fleet Corporation, 
Industrial Relations Division, Philadelphia, January 1919. 254 
pp. 

Worth, W. E. The International Harvester Company Plan. Chi- 
cago, Brick and Clay Record, January 11, 1921, pp. 27-29. 

Youngstown Sheet and Tube Company. Representation of Em- 
ployees. Youngstown, Ohio, 1918. 



APPENDIX E 

AN EXPERIENCE WITH PROFIT-SHARING 1 

The profit-sharing scheme referred to in Chapter XVII consisted 
of a legal contract between the company, which was capitalized at 
several millions, and the employee, designed "to give the employee 
a greater interest in the company and a share in the profits in order 
to induce continuous, intelligent, and faithful services to the company, 
and to provide for increasing emoluments to the employee so long 
as he gives his entire time, energies, and fidelity to the welfare of 
the company." The employee agreed to remain in the employ of the 
company for a period of five years at the salary received at the time 
the contract was signed; in return for which he was allowed to 
subscribe to stock whose par value amounted to three times his annual 
salary and agreed to pay for it according to a rather elaborate plan 
whose main features were as follows : Interest at the rate of 4 per 
cent was charged the employee on the par value of the stock. In 
return he was credited with all cash dividends declared. New stock 
dividends were not credited in the same way as cash dividends, but 
were held until the original stock became the property of the em- 
ployee. In addition to cash dividends, the employee's account was 
credited with a "bonus" consisting of 2 per cent of the par value 
of his stock the first year and increasing y 2 per cent each subsequent 
year under the contract. Further, the employee was required to 
subscribe 10 per cent of his salary in payment for his stock. 

Altogether, the contract covered five pages of legal cap paper, 
and there were three pages additional of explanations of terms, etc. 
Provision was made for the termination of the contract under various 
eventualities — in case of resignation, discharge, disability, and death.' 

The plan had been worked out very carefully by the officers of the 
company, after an examination of numerous profit-sharing schemes. 
They were very enthusiastic about it and were, without doubt, sincere 
in their belief that it would be of mutual benefit to the employees 
and to the company. Those who should be allowed to participate were 
selected with great care and with due regard to their potential value 



^The matter in this appendix refers to Chapter XVII. 

481 



482 APPENDIX 

to the company. These included executive officers below the grade 
of general manager, superintendents, assistant superintendents and 
foremen, the general sales manager and various salesmen, the com- 
pany's auditor, and several of the more important members of the 
general office force. 

In introducing the plan the company struck a snag immediately 
in the provisions against salary raises. Every employee of any 
ambition at all has dreams of the boss calling him in and with one 
hand on his shoulder — as depicted in the correspondence school adver- 
tisements in the magazines — saying: "Young man you have shown 
your worth. The firm wishes to recognize your ability. Your salary 
is therefore raised to" — whatever the youngster's wildest dream of 
avarice happens to be at the time. The proposed destruction of this 
picture at one fell stroke of the pen took all the joy out of life. As 
a result, objections which were voiced gave rise to an explanation 
that "of course, in case of promotion the salary would be raised." 
This satisfied such men as had reasonable prospects of advancing as 
the business grew, but the fact remained that in the majority of 
cases there was a feeling that a right had been signed away — that 
hope had received a dastardly blow in the back, and that something 
had been subtracted from the joy of existence. 

The legal phraseology bothered a number — probably not over fifty 
per cent of the participating employees understood exactly what it 
did mean, but took the contract on faith because they trusted the 
officials of the company personally. Certainly not over 25 per cent 
understood clearly how the transfer of earnings to capital account 
rather than their distribution as dividends, thereby transferring 
ownership of the stock so much sooner, benefited them personally. 
Others objected to the subtraction of 10 per cent from their incomes. 
One man said frankly, "Part of my fun is backing my own judgment. 
I'd rather take a flyer in real estate now and then with the chance 
of making a big killing than to turn in all I can save to the company." 

Although participants were picked with great care and with as 
great an exercise of fairness as possible under the usual methods 
of personal judgment, there was some dissatisfaction with selections. 
Most of it was due to petty jealousy, but there were bound to be one 
or two unwise selections, as will always be the case so long as 
sycophancy exists. Bluffers can always be seen from the bottom, 
whether or not they are visible from the heights where the general 
manager's chair rests. Similarly one or two foremen felt they were 



AN EXPERIENCE WITH PROFIT-SHARING 483 

hardly treated because they were left out. Salve applied to their 
wounded feelings in the form of slight raises opened wounds in such 
participants as had wives who gossiped over the back fence, and 
who did not understand any sort of profit-sharing which allowed 
their rivals more to spend on hats than they had. 

Not very long after the contracts were signed a period of business 
depression occurred. The company's earnings fell off and dividends 
were reduced to such an extent that it required, in the case of men 
who had just signed, all the bonus and part of the 10 per cent salary 
payment to satisfy the 4 per cent interest on stock. A profit-sharing 
scheme that ate up part of a man's salary didn't look good to them. 
To others, profit-sharing when there was nothing to share, was not 
much of an incentive to strenuous endeavor. In spite of Henry 
Ford's theory that a man will work harder to hold a $io,ooo-a-year 
position than to secure one, there is something in human nature to 
which unrealized delights appeal more strongly than known discom- 
forts. What was endured once can be endured again. Pleasures 
gained become an old story. Hope is a greater incentive than fear, 
in that it is more often present. Fear may sway at a crisis, but hope 
is what preserves the race. 

When the annual statements showed negligible credits to the par- 
ticipants' stock accounts there was a general feeling of disappoint- 
ment. In some cases the feeling was that the thing had never 
amounted to anything anyway. A few had been suspicious from the 
start, believing that it was merely another manifestation of capital's 
effort to persuade the laboring man to barter away rights. Failure 
of profits merely confirmed this suspicion. Another group attempted 
to analyze the drop in profits. The falling off in sales seemed to 
some due to lack of salesmanship. Individual salesmen and the 
sales management were criticized — especially by the factory group. 
They were working just as hard and just as conscientiously as ever, 
and gossip in regard to motor trips and wine parties assumed undue 
importance. Even the management was severely criticized for 
retaining certain salesmen and executives. The eternal cry of the 
salesmen, "How could a salesman expect to make sales when the 
factories were shipping such rotten stuff?" became louder than ever. 
The always present feeling of antagonism between the selling and 
manufacturing departments was given a new impetus and old jeal- 
ousies were revived. 

Later on, the business depression showed signs of increasing. One 



4 8 4 



APPENDIX 



executive encountered hard luck. The management allowed him to 
convert the amount earned under his contract into cash. The news 
leaked out. Factories were shut down. More hard luck stories 
resulted in the further cashing of contracts. Before long, so many 
had cashed in that no one bothered to concoct hard luck stories. 
They just said they needed the money. At last reports, with one 
or two exceptions, everyone who had the courage had arranged for 
the cancellation of his contract. Immediate cash in hand looked 
better than stock in a concern over whose policy they had no control, 
in a country over whose prosperity they had no control. So ended 
the profit-sharing plan. 



INDEX 



Accessories, 

standarization, 188 

in Europe, 201 

in France, 204 

in Germany, 202 

Administration, 349-394 

in England, 380 
A. E. G. (See "Allgemeinen Elektri- 

citats Gesellschaft") 
Allgemeinen Elektricitats Gesell- 
schaft, 121-128 
factory building, 121, 128 
scrap handling plant, 174 
stores system, 155 
Ansaldo company, 
factory buildings, 115 
organization, 44 
Apprenticeship, 
France, 425 
Germany, 414-420 
Assemblying, standardization, 191, 
194 
in Europe, 206 
l'Atelier Central de Reparations du 
Service Automobile, 
planning and dispatching sys- 
tem, 235 
Authority, corporate vs. line and 
staff, 367 

B 

Banks, French customs, 36 
Berliet Automobile Company, 

machine tool shop practice, 164 

organization, 46 

stores system, 153 

Venissaux plant, 113 



Betriebsratgesetz, 453 
Bibliographies, 470-472, 477-480 
Bolshevism, 80 
Bonuses, 276 

choice of system, 285 

Emerson system, 303 

French systems, 309 

group system, 305 

Italian system, 294 

Priestman system, 304 

record of, 310 
Breda locomotive plant, organiza- 
tion, 46 
Budgets, 358 



Cadbury Brothers 

industrial training, 421 

shop committees, 451 
Cambridge Psychological Labora- 
tory, 407 
Car-dumping plant, 174 
Charlottenberg, 

psycho-technical tests, 409-412 
Charts, (See also "Graphic con- 
trol") 

departmental, 389 

employment department, 334 

organization, 365, 369-372, 381- 
388 
Chatelier, Henri le, 234 
Cole, G. D. H., "The payment of 

wages," 296 
Control, 349-394 

elements of, 354 
Conveyors, 171 
Corporations, 

consolidations, 44-70 



485 



486 



INDEX 



Corporations — Continued 
limited earnings, 64 
organizations, 44-70, 349-394 
signatory authority, 63 
stockholders' protection, 62 

Cost of Living, 264, 335 

Costs, 
estimate of, 359 
ultimate, 18 

Cranes, 170 

Customs, business, 25-43 



De Angel cotton-print plant, 46 
Debating societies, 423 
Decentralization, English plant, 391 
Definitions, labor terms, 464-469 
Delivery dates, 388 
Dispatch board, 257-261 
Dispatching (See "Planning and 
dispatching") 

E 

Earnings, limitation of, 64 
Education of employees, 321, 406-427 

apprenticeship schools, 414-420 

bibliography, 470-472 

debating societies, 423 

England, 420 

Cadbury Brothers, 421 
prospectus of day continuation 
school, 473-476 

France, 425 

Germany, 409-414 

Italy, 426 

managers, 424 
Efficiency, 

factory buildings, 100 

gauging of, 290 
Electric power, for machinery, 176 
Emerson, Harrington, on efficiency. 

284 
Emerson piece-work system, 287, 

303 



Employees, 

classification of, 390 
selection and education of, 395-427 
shop government and profit-shar- 
ing, 428-457, 477-48o 

Employers' associations, England, 

57 
Employment department (See 

"Personnel work") 
Employment manager, 

attitude of workers toward, 322 

qualities of, 336 

work of, 319 
England, 

bonus systems in, 303-308 

consolidations, 56-60 

corporate organization, 65 

Education Act of 1918, 420 

factory buildings, 105 

industrial councils, 446 

industrial education, 407, 420 
Cadbury Brothers, 421 

industrial plants, 47 

labor conditions, 85-98 

machine-shops, 167 

management participation, 445- 

453 

National Confederation of Em- 
ployers' Organizations, 57 

office hours, 31 

organization and administration 
in, 380-394 

personnel work, 342-347 

planning and dispatching sys- 
tems, 256-262 

standardization in, 200 

Triple Alliance, 58 

wage standardization, 59 

wage systems in, 296 
English Electric Company, rate- 
setting, 301 
Equipment, standardization of, 188 

in Europe, 201 

in Germany, 202 



INDEX 



487 



Executives, 

classification of, 390 
control by, 349-394 

in -Europe, 379 
German, 33 
organization, 368 
present-day, 458 
vs. administrators, 352 

Exhibitions, commercial, 68 



Fabian Society, on efficiency, 279 
Factory buildings, 100-130 

American, 128 

American vs. European, 109 

French, no 

Berliet Automobile Company, 

113 

Le Creusot, no 
German, 1 17-128 

Loewe company, 117-121 
Italian, 113 
Ansaldo company, 115 
Fiat Motor Car Company, 116 
single-story in England, 108 
Factory management (See "Indus- 
trial management") 
Factory order card, 262 
Federal Council of Economics, Ger- 
many, 52 
Fiat Motor Car Company, 
factory buidings, 116 
organization, 44 
Fleming, A. P. M., and J. G. Pearce, 
on scientific management, 301, 
424 
Flooring, factories, 101 
Foremen, 211 
Foundry, English, 106 
France, 

banking customs, 36 

consolidations, 60 

corporate organization, 65, 379 



France — Continued 

factory buildings, 1 10 
industrial education, 425 
industrial plants, 46 

visit to, 38 
labor conditions, 83 
machine-shops, 164 
machining, progressive in, 237 
management participation, 444 
office hours, 32 
organization and administration, 

379 
paternalism in business, 36 
personnel work, 336-339 
planning and dispatching, 234-245 
progressive manufacture in, 243 
rate-setting, 308-315 
standardization, accessories, 204 
stores system, 152 

Renault and Berliet plants, 152, 

153 
wage systems in, 308-315 
Franco Tosi Turbine plant, 46 
Franklin, Benjamin, 182 
Freminville, Charles de, 234 



Germany, 
apprenticeship schools, 414 
business discipline, 35 
corporate organization, 65 
factory buildings, 1 17-128 
Federal Council of Economics, 52 
food and work in, 33 
industrial plants, 48-56 
job analysis, 409 
labor conditions, 82 
management participation, 453- 

456 
mass production, 245 
mechanical handling, 174 
organized economic system, 51 
paralysis of industries, 10 
personnel work, 339 



488 



INDEX 



Germany — Continued 
planning and dispatching, 245, 

255 

progressive manufacture in, 246 

rate-setting in, 294 

scientific management in, 253 

standardization of accessories, 
202 

tests for employees, 409-414 

wage standardization, 59 

wage systems in, 294 
Gompers, Samuel, on wages, 282 
Graphic control, 231, 372 

control charts, 361 

dispatch boards, English, 257-261 

English plant, 392 

France, 237 

H 

Halsey piece-work system, 287 

Health, 321 

Heating and ventilating factories, 

101 
Human nature, in managing men, 363 
Hydro-Electric Trust of Italy, 61 



Ideals in business, 355 
Ilva Steel Company, 44 
Industrial councils, 440-457 

bibliography, 477-480 

England, 445~453 

France, 444 

Germany, 453-456 

Italy, 444 
Industrial education (See "Educa- 
tion of employees") 
Industrial management, 181 

Benjamin Franklin on, 182 

France, 234 

inefficiency of, 210 

present-day, 183 



Industrial organization, Germany, 

51 
Industrial plants, 

English, 47, 56-60 

French, 46 

German, 48-56 

Italian, 44 

Information, organizations for, 67 

Instruction cards, in France, 204, 
240 

International trade, 

American handicaps for a world 

trade, 18 
American ignorance of customs, 

20 

Inventories, 134 

Italo-American Navigation Com- 
pany, 44 

Italy, 

business customs, 41 
consolidations, 61 
corporate organization, 65 
factory buildings, 113 
industrial education, 426 
industrial plants, 44 
labor conditions, 76-80 
management participation, 444 
personnel work in, 339 
planning and dispatching system, 

255 
stores system, 152 
wage systems, 293 



Job analysis, 397, 399 
Germany, 409 
scientific analysis for, 277 
stop-watch methods, 278 

Job cards, 262 



K 

Krupp Company, 48 



INDEX 



489 



Labor, 71-99 (See also "Personnel 
work") 
England, 85-98 
France, 83 
Germany, 82 
Italy, 76-80 
proficiency of, 265 
selection and education of, 395- 

427 
standardization of, 186 
wages, 264 
Labor organizations, England, 58 
Labor terms, 464-469 
Labor turnover, 318 
Language, 26 
Le Creusot, 46 

power plant, no 
Lever Brothers, industrial training, 

422 
Lighting, factory, 100 
Loewe, Ludwig, Machine Tool Co., 
factory buildings, 117-121 

M 

Machine-shops, 161-167 
English, 167 
French, 164 
Machine tools, American, 161 
Machinery, 161-180 

electric power driven, 176 
standardization of, 188 
in Europe, 201 
in Germany, 202 
Machinery, progressive, 192 
in Europe, 205 
in France, 237 
Management, (See also "Industrial 
management"; "Scientific man- 
agement") 
employees' participation in, 
bibliography, 477-480 
England, 445"453 
France, 444 



Management — Continued 

employers' participation in — Con- 
tinued 

Germany, 453-456 
Italy, 444 
Managers, education of, 424 
Manners, 27 
Manufacture, progressive, 

in France, 243 

in Germany, 246 
Mass production, 

Germany, 245 

standardization of, 191 
Mechanical handling, 169-177 

scrap handling plant, A. E. G., 174 
Mental tests, 397, 403 

Germany, 409-414 
Moede, Dr., 409 
Moellendorf, Dr. von, 51 
Musicio, Bernard, 407 
Myers, Dr. C. S., 407 

N 

National Confederation of Em- 
ployers' Organizations, 57 

National Institute of Psychology 
and Physiology, 407 

National problems, n 

O 

Office hours, 

English, 31 

French, 32 
Organization, 

charts, 365, 369-372 
English, 381-388 

English factory, 380-394 

executive, 368 

factors in, 351 

functionalizing, 365 

industrial plants, 44-70 

mechanics of, 364 

planning, 374-37& 

staff and line, 366 
Overhead charges, 102, 107 



490 



INDEX 



Penhoet shipyards 
planning and dispatching system, 

235 
Personnel work, 316-347 
base rates, 333 
charts for, 333 
director, 

duties of, 319 

qualities of, 336 
education, 321 
in England, 342-347 
in France, 336-339 
in Germany, 339 
in Italy, 339 
managing men, 363 
mistakes of, 322 
safety work, 320 
sanitation and health, 321 
standard practice instructions, 

326-332 
Piece-work systems (See "Rate- 
setting"; "Wages") 
Pirelli rubber plant, 46 
Planning and dispatching, 217-263 
dispatching mechanism, 231 
dissecting mechanism, 227 
England, 256-262 
flow of production, 221 
forms, German, 247 
France, 234-245 

l'Atelier Central de Reparations 
du Service Automobile, 235 

Penhoet shipyards, 235 
Germany, 245-255 
graphic control, 231 
Italy, 255 

organization for, 374-378 
planning mechanism, 231 
reservoir for, 225 
speed, regulation of, 221 
standardization of, 225 
Plants (See "Factory buildings"; 

"Industrial plants") 



Plantwirtschaft, 51 

Population, 16 

Post-war conditions, 4-24, 458-463 

Power plants, 

English, 48 

French, 47 

Italian, 46 

Le Creusot, 102 
Pre-war conditions, 104 
Priestman bonus system, 304 
Procedure, standardization of, 189 
Production clerk, 223 
Production flow, 221 
Profit-sharing, 429-440, 481-484 

bibliography, 477 
Profits, fundamentals of, 356, 359 
Programs, manufacturing, 

in France, 244 
Purchasing, principles of control, 
131 

R 

Rate-setting, 264-315 

bonus systems, 276, 285 

by guesswork, 274 

efficiency gauged by, 290 

in England, 296 

English Electric Company, 301 

in France, 308-315 

in Germany, 294 

in Italy, 293 

need of, 292 

piece-work systems, 287 
Rathman, Dr. Walther, 51 
Reichswirtschaft, 52 
Renault plant, 47 

machine-shop in, 164 

stores system, 152 
Renold, Hans, Ltd., 

shop committees, 449 

stores system, 160 
Research departments, 200 



INDEX 



491 



Reservoir for planning and dis- 
patching, 225 

Responsibility of management, 284 

Rhine Elbe Union, 48 

Rolling-mills, electrically operated, 
176 

Romeo Company, 46 

Rossi cotton plant, 46 

Rowan piece-work system, 287 

Russia, economic conditions, 75 



Safety work, 320 
Sales policies, English plant, 392 
Sales quotas, 359, 389 
Sanitation, factory, 102, 321 
Schneider Company, 46 (See also 
"Le Creusot") 
personnel work at, 336 
Scientific management, 
in England, 301 
in Europe, 8 
in Germany, 253 
stockholders and, 269 
Scrap handling plant, 174 
Seating of workmen, 102 
Shop committees, 440-457 
bibliography, 477-480 
England, 449 

Cadbury Brothers, 451 
Renold, Ltd., 449 
S. I. P. E. chemical plant, 44 
Speed regulation in factory, 221 
Standardization, 19, 181-208 
accessories, 188 
in Europe, 201 
in France, 204 
in Germany, 202 
assembling, 191, 194 

in Europe, 206 
defined, 185 
England, 200 
labor, 186 



Standardization — Continued 
machinery and equipment, 188 
in Europe, 201 
in Germany, 202 
machining, progressive, 192 

in Europe, 205 
mass production, 191 
materials of, 185 
of procedure, 189 
planning and dispatching, 217-263 
wages, 264-315 
Statements, 357 
Stockholders, protection of, 62 

influence of, 347 
Stop-watch methods for time study, 

278 
Stores systems, 131-151 
American, 152 
English, 159 

Renold plant, 160 
German, A. E. G. plant, 155 
Italian and French, 152 



Taylor system, in England, 300 
Tests for employees, 397, 399-405 
Time study, (See also "Job Anal- 
ysis"; "Rate-setting") 
in France, 204 
Trade tests, 397, 402 
Trusts, English, 56-60 

European attitude toward, 44 
German, 

subsidiary trusts, 54 
vertical, 50 
Turbine power plant, Le Creusot, 
in 

U 

Unit assembly, standard, 191 

V 



Vickers, Ltd., 47 



492 



INDEX 



W 

Wages, base rates, 333 
day-wage system, 271-274 
fair, 264 
in England, 296 
in France, 308-315 
in Germany, 294 
in Italy, 293 

individual production standards, 
267 



Wages, base rates — Continued 

piece work, 274 
proficiency scale, 265 
standardization of, 59 

War, effects of, 459 
Waste, elimination of, 213 
Whitley Industrial Councils, 445 
Wilson, W. B., on efficiency, 279 



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